The Swiss National Bank’s recent meeting minutes indicate that interest rates are unlikely to drop into negative territory. Inflationary pressures in Switzerland are not projected to become persistently negative, and the US tariffs’ impact on the Swiss economy is expected to be limited.

The Governing Board’s Belief

The governing board believes the current monetary policy is appropriate and should continue. US tariffs are affecting a segment of the economy, potentially reducing global trade and the purchasing power of US households. Cooling signs in the US labour market have raised expectations of monetary policy easing in the US.

The financial market saw low volatility in the third quarter of 2025. Key risks include US tariffs and global demand, with exchange rate movements posing a risk to inflation forecasts. The USD/CHF pair attracted slight bids after the SNB minutes release, climbing 0.21% higher to near 0.7980 during Thursday’s session.

The Swiss National Bank (SNB) is Switzerland’s central bank, focusing on maintaining price stability. This involves adjusting policy rates, which influence the Swiss Franc’s value. The SNB intervenes in the forex market to manage the Swiss Franc’s strength. Monetary policy decisions are made quarterly, where inflation forecasts are also updated.

The Swiss National Bank has signaled it will hold interest rates steady, as fears of persistent negative inflation are off the table. This provides a solid floor for the Swiss franc in the coming weeks. We see this as a clear divergence from the US, where markets are pricing in potential rate cuts from the Federal Reserve following signs of a cooling labor market.

This stance is credible given that Swiss inflation has remained manageable, running at 1.4% year-over-year in the second quarter of 2025, which is well within the SNB’s comfort zone. In contrast, the latest US Non-Farm Payrolls report from September showed job growth slowing, fueling expectations for Fed easing before year-end. This policy divergence is a strong signal for traders to anticipate franc strength against the dollar.

Market Opportunities and Risks

With financial markets showing low volatility in the third quarter, as noted in the minutes, option premiums on currency pairs like USD/CHF are likely subdued. This environment presents an opportunity to purchase put options on USD/CHF at a reasonable cost. Such a strategy would profit if the pair falls below the strike price, which aligns with our expectation of franc appreciation.

We should also remember the SNB’s playbook during the high inflation period of 2022 and 2023, when it actively allowed a stronger franc to curb the cost of imports. Their current comfort level suggests they will not intervene to weaken the currency, removing a major risk for those betting on a stronger franc. The slight rise in USD/CHF to 0.7980 after the minutes could be a brief reaction, offering a better entry point for long-franc positions.

However, the SNB highlights global trade tensions from US tariffs as a key risk, which could trigger a sudden market shock. The Cboe Volatility Index (VIX) has been trading below 15 for most of the third quarter, reflecting market complacency. Given this backdrop, buying a straddle on EUR/CHF could be a prudent hedge, as this position would benefit from a large price move in either direction.

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