SNB kept rates on hold, signalling a high bar for negative rates

Highlights: The Swiss National Bank (SNB) kept the policy rate unchanged at zero, in line with market expectations. Policymakers lifted their near-term economic growth forecasts amid the US-Switzerland trade deal, and signalled the near-term inflation undershooting doesn’t necessarily increase chances of negative interest rates. We continue to expect zero rates until end-2027, and the stabilisation in relative rate differential with the US to support our neutral view for CHF.

• The improved trade deal framework from the US (tariffs on Swiss goods have been lowered to 15 per cent from 39 per cent previously) decreases downside risks to Swiss growth. While the near-term inflation forecasts were lowered, the SNB was quick to point out that this would not raise the chance of negative interest rates, given the unintended consequences this would have on the domestic economy. With the Federal Reserve signalling a likely pause for upcoming meetings, interest rate differentials should stabilise, supporting our neutral view for CHF. While the SNB reiterated that interest rates remain its main tool, we do not rule out the possibility of limited or targeted FX interventions in the event of more sustained CHF appreciation pressures
• The meeting did not deliver major surprises, both in terms of decision and language used in the press conference. As such, derivatives market pricing has remained largely unchanged this morning, effectively showing stable SNB rates at zero across 2026. CHF rallied against all G10 peers, climbing c.0.25 per cent against EUR (EUR/USD 0.93) and USD (CHF/USD 1.25) to recover the earlier December weakness and return near the middle of its 6-month trading range. This is partly reacting to the Fed’s decision to lower rates yesterday, as well as the SNB’s reluctance to cut rates further. Swiss equities climbed along with their European peers to pare a weaker opening but slightly underperformed at time of writing
• We maintain a neutral medium-term view on CHF, with USD/CHF expected to move sideways across 2026. Our European equity positioning is tilted towards cyclical outperformance, with our mild overweight preferences lying with Italy and Spain and a mild underweight on Swiss equities