Tariff Turmoil Drives Swiss Franc Higher, Pushing SNB Toward Negative Rates
April 07, 2025SNB Poised to Slash Rates Further
Since Trump’s tariff shock last week, numerous analysts have revised their forecasts, now widely expecting the SNB to cut its key policy rate by 25 basis points. Currently at 0.25% with inflation at a near-zero 0.3%, the SNB remains prepared to move its rates into negative territory if necessary to preserve price stability within its target range of 0-2%. Governing board member Petra Tschudin acknowledged, "Negative rates aren't something we'd be happy about, but they are an essential tool if we must stabilize inflation."
Swiss Franc: The Safe-Haven Superstar
In turbulent times, the Swiss franc has solidified its reputation as a safe-haven currency. On Monday, it reached a six-month high against the U.S. dollar and posted its strongest performance against the euro since the end of 2024, as well as against the pound since last August. This robust performance underscores the franc’s critical role in the currency market, acting as a buffer against global trade disruptions and economic uncertainty.
Economic Impact and Market Outlook
Heavier tariffs on Swiss imports have forced economists to downgrade growth forecasts for the Swiss economy. A stronger franc is likely to exert additional deflationary pressure by lowering import costs, further complicating the SNB’s policy stance. Although the next scheduled monetary policy meeting is in June, some analysts believe that mounting deflation risks—exacerbated by falling oil prices—could prompt the SNB to act sooner. With predictions now leaning towards another 25 basis point cut, experts like Adrian Prettejohn of Capital Economics expect the SNB’s key rate to hit zero by June, and possibly even dip into negative territory.
Conclusion
As global trade tensions continue to ripple through the markets, the surge in safe-haven demand is bolstering the Swiss franc, which in turn pressures the SNB to consider further rate cuts—potentially into negative territory—to safeguard economic stability.