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The Swiss National Bank (SNB) remains firmly committed to price stability, with recent commentary from policymakers reinforcing the central bank’s readiness to act if needed. With inflation running low and likely to dip further, market expectations for a March rate cut remain firmly in place (88% chance), though the trajectory beyond that remains uncertain.
 

Key Takeaways from SNB Officials

• Chairman Schlegel (Jan 27th):
  • Expressed that while negative rates are not preferred, they remain an option if required.
  • Acknowledged that Swiss inflation is expected to be low, with the possibility of monthly data dipping below 0% this year.
• Governing Board Member Tschudin (Feb 14th):
  • Stressed that maintaining price stability is the SNB’s most important task.
  • Highlighted FX intervention as a key policy tool, suggesting that currency management could remain active if necessary.
  • Left the door open for negative rates, reinforcing Schlegel’s earlier remarks.
     

Market Expectations: A March Cut Looks Certain

• Inflation Trends: January’s 0.4% Y/Y inflation print was in line with market expectations and only slightly above the SNB’s Q1 forecast (0.3%). However, the central bank projects a further decline to 0.2% in Q2 before a modest pick-up into year-end.
   

What’s Next? The February CPI Release is Key

With policymakers signaling flexibility on policy and inflation expected to remain subdued, the February CPI release will be pivotal in shaping rate expectations beyond March. If inflation undershoots expectations—particularly if it dips negative—it could strengthen the case for further easing and increase bets on hitting the zero lower bound.

For now, barring a major hawkish surprise, the SNB looks set to deliver a March cut, with the focus shifting to how aggressively it may ease through the rest of the year.

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