At an event overnight, new SNB Chair Martin Schlegel indicated that the central bank is prepared to continue easing monetary policy if necessary to maintain medium-term price stability, and the central bank “can’t rule out negative rates either.”
Schlegel emphasized that SNB sees “downward risks to Swiss inflation as bigger than upward risks,” suggesting that deflationary pressures are a significant concern for the Swiss economy.
He also acknowledged the challenges posed by the strong Swiss franc for exporters. However, he pointed out that the primary issue facing Swiss companies is “weak foreign demand,” rather than currency strength alone.
Markets are currently pricing in an 85% probability that SNB will lower rates further by 25bps to 0.75% at its December meeting.
