Analysis-Why Switzerland’s strong franc could lead it back to negative interest rates

Written by Amanda Cooper and Naomi Rovenik

LONDON (Reuters) -Switra can be the first large economy due to the negative interest rates to combat the increasing currency and low prices, while highlighting the rapid exile of central bankers from traditional policy tools with the emergence of the global trade war.

The data that reached the decline in the prices of Swiss consumers in May prompted the preparation of the Swiss National Bank to reduce its standard price by 0.25 % to less than zero, as it struggles to cool the red franc.

In 2022, the central banks in Europe left behind a decade of prices that are less than zero that hurts both banks and savers. Negative prices were offered to stimulating lending, as it turned into Orthodox money on the head by imposing fees on banks to stop deposits with the central bank instead of paying interest on them.

Since then, many policy makers have concluded that they have not succeeded, as he had hoped, and weighing bank profits at a time when they needed to invest investors and push them to more dangerous assets.

Since Switzerland is trying to stimulate its economy, it is subject to scrutiny by the American administration of how it deals with its currency, which is traditionally seen as safe harmful harms at unstable times.

The trade war of US President Donald Trump has raised the risk of inflationary pressures and a slower growth – a mixture of nightmare for central employees, politicians, companies and families.

The complexity of matters for non -United States policy makers is a comprehensive appreciation in the currencies of tariffs, from the euro and the pound to Korean Won and the dollar of Taiwan, which hurts its exports and economies.

The Swiss franc gained about 11 % against the dollar in 2025, which represents its best performance at this stage of the year since 2011.

The problem faced by SNB and its peers is that traditional policy tools, such as talking about its currencies or tampering with short -term lending rates, are ineffective in this environment.

“The inflation drivers that lie in the control of any central bank are always causing a bad balance or error in politics,” said James Ati, the fixed income manager at Marluo.

He said SNB “is being intimidated by the foreign currency market to negative prices.”

SNB refused to comment on this idea, but separately on Friday he said it would enter the currency market when necessary to maintain inflation on the right track after adding Switzerland to a list of American countries that are monitored to obtain an unfair currency and commercial practices.

While other central banks also deal with the repercussions of the weakest dollar, Switzerland has the lowest rates between large advanced economies, followed by Japan, by 0.5 %. Japan also fights for inflation anchor and acquires the yen 9 % of the year.