The SNB chairman, Martin Schlegel, stated the regulator’s awareness of the adverse effects associated with implementing negative interest rates. In his remarks to Migros-Magazin, Schlegel emphasised that there is a high threshold for adopting such a policy.
Furthermore, he noted that the uncertainty surrounding US tariffs is negatively impacting the economy. Despite continuous discussions on these topics, markets appear to have adjusted, with no further rate cuts expected for the rest of the year.
Switzerland’s Monetary Policy Stability
These comments from Chairman Schlegel confirm the Swiss National Bank is firmly on hold. With the latest data from August 2025 showing Swiss inflation holding steady at 1.6%, there is no internal pressure for them to consider cutting rates further. We are seeing a clear signal that the policy floor has been set for the foreseeable future.
Looking back, the SNB was aggressive, leading the rate-cutting cycle in March 2024 and cutting again as recently as February 2025 down to 1.00%. That era of easing is now clearly over. This policy stability reduces the appeal of using the Swiss franc as a cheap funding currency for carry trades against higher-yielding currencies.
For derivatives traders, this points toward lower implied volatility in franc currency pairs. With the central bank telegraphing a steady hand, the probability of sharp, unexpected policy moves in the coming weeks has fallen. This environment favors strategies that profit from range-bound markets, such as selling strangles on EUR/CHF.
Concerns Over US Tariff Uncertainty
The mention of US tariff uncertainty is a key external risk, especially following whispers last week that the US is considering new levies on European industrial goods. This threat should cap any significant franc appreciation, reinforcing the idea that the currency will be stuck in a fairly predictable channel. It means traders should be cautious about buying far out-of-the-money call options on the franc.
This view is already well-reflected in the interest rate futures market. Current pricing shows that traders are assigning less than a 10% probability to another SNB rate cut by the end of 2025. The market has fully digested the SNB’s message, so the trade now is to position for this period of stability to continue through the autumn.
