Switzerland considers negative rates after deflation

Switzerland is considering reintroducing negative interest rates after experiencing deflation in May, the first such occurrence since 2021. This move aims to combat weakening price pressures and a subdued economic outlook. Consumer prices in Switzerland fell by 0.1% in May, prompting speculation that the Swiss National Bank (SNB) will cut its policy rate, currently at 0.25%. Economists predict cuts, potentially bringing the rate to -0.25% or even -0.75%. The SNB, which targets inflation between 0% and 2%, is expected to prioritize interest rate cuts over foreign currency interventions. The central bank faces the challenge of supporting inflation while managing the risks of unconventional measures.