SNB's Chairman Schlegel: A few months of negative inflation wouldn't be a problem

SNB Chairman Schlegel suggested that negative inflation could occur this year but insisted it wouldn't pose a significant problem. The SNB recently kept interest rates unchanged and displayed optimism regarding the future outlook, mainly due to reduced US tariffs. However, Schlegel emphasized that the threshold for resuming negative rates remains quite high. Market sentiment around negative rates flipped as the SNB firmly rejected these expectations last year. The strength of the Swiss Franc, which reached a record high against the Euro due to geopolitical concerns, was highlighted as a contributing factor to potential deflation. With no rate cuts or hikes anticipated this year, the CHF appears sensitive to risk sentiment linked to geopolitical events, notably tariff threats from Trump. A de-escalation could weaken the Franc, whereas escalation might push it higher and add downward pressure on inflation.