SNB expected to avoid negative rates despite inflation downturn

By John Revill

ZURICH, Dec 3 (Reuters) - The Swiss National Bank will stick to its 0% interest policy next week and well into 2026 rather than opting for negative rates, economists said on Wednesday, despite inflation slipping below expectations to the bottom end of the SNB's target range.

Switzerland's annual inflation rate unexpectedly slowed by a 10th of a percentage point in November to zero, slightly undershooting expectations, official data showed.

The consensus forecast of a Reuters poll of analysts was that inflation would remain unchanged at 0.1% last month.

The 0% reading was at the bottom end of the SNB's price stability target for inflation between 0% and 2%, and the lowest figure since May.

DATA IS LAST INFLATION READING BEFORE RATES DECISION

The central bank declined to comment on the figures, which were the last inflation data before it announces its next interest rate decision on December 11.

Still, despite the downturn economists reckon the SNB will keep its benchmark interest rate unchanged at 0% and well into 2026.

"There is no need for policy changes," said Karsten Junius, an economist at J.Safra Sarasin, who also expects no change in 2026.

Rudolf Minsch, chief economist at economiesuisse, also expects the central bank to keep interest rates at zero next week and throughout 2026, while Swiss inflation would increase to around 0.4% next year.

"Negative interest rates also have undesirable effects, and are only used when there is an urgent necessity, which we don’t see," he said.

SNB HAS HIGH THRESHOLD TO CUT RATES

Likewise, UBS economist Alessandro Bee said he expected the SNB to keep rates at 0% into 2026, when he expected a slight acceleration in Swiss inflation due to higher wages next year.

Market expectations are presently that the bank will leave the benchmark rate unchanged next week.

SNB officials have also previously said they expect inflation to rise in future, while they also said they would tolerate inflation falling below 0% temporarily.

(Writing by John Revill and Dave Graham, Editing by Miranda Murray, Aidan Lewis)

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