SNB Chairman Schlegel: "Not an Easy Situation" as Inflation Dips Near Zero
February 02, 2026The Dilemma of Low Inflation
Speaking to broadcaster SRF, Schlegel highlighted that while the SNB is fully committed to price stability, the current inflation rate is testing the lower boundary of the bank's 0-2% target range. This proximity to deflationary territory, combined with zero interest rates, limits the bank's conventional maneuvering room. Schlegel described this combination as "uncomfortable" and admitted that it is "not an easy situation for monetary policy."
The Specter of Negative Rates
The Chairman acknowledged that the SNB relies on two primary levers: interest rate adjustments and foreign exchange market interventions. When pressed on the possibility of returning to negative interest rates, a policy utilized between 2014 and 2022, Schlegel remained pragmatic but cautious.
He reiterated that the SNB is prepared to push rates into negative territory if the situation demands it. However, he emphasized that the "hurdle is higher" for such a move compared to previous cycles. He declined to speculate on the specific probability of reintroducing negative rates, which are historically unpopular with both lenders and savers.
Outlook and FX Interventions
For the immediate future, Schlegel deems the current monetary conditions appropriate. He noted that the SNB expects inflation to rise slightly in the coming months. Nevertheless, the central bank remains vigilant regarding the exchange rate of the Swiss Franc. Schlegel confirmed that the SNB will continue to monitor the currency closely and stands ready to intervene in forex markets if excessive appreciation threatens price stability.
No Alternative to the US Dollar
On the topic of foreign reserves, Schlegel addressed the recent weakness of the US Dollar during an appearance on the "Eco Talk" program. Despite the greenback's recent decline, he stated that there is simply "no alternative" to US Treasuries for central banks requiring deep liquidity for their reserves. He stressed that for sovereign wealth funds and central banks, the US Treasury market remains the largest and most liquid option available.