Swiss franc rises too sharply! Economists predict that the Swiss National Bank may return to the era of "zero interest rates" in June.

The Swiss National Bank will hold its next policy meeting on June 19th. According to a survey, about two-thirds of the interviewed economists expect the Swiss National Bank to cut the benchmark interest rate by 25 basis points to 0% next month. This would bring Switzerland's benchmark interest rate back to the level of September 2022, just after the seven-year period of "zero interest rates" had ended. After US President Trump announced a large-scale imposition of retaliatory tariffs on what he called "Liberation Day" last month, amidst the background of funds leaving US assets and flowing into Swiss franc-denominated assets for safe-haven purposes, the Swiss franc against the US dollar hit a 10-year high, and the Swiss franc against the euro also approached its highest level in the same period. The Swiss National Bank is gradually moving towards zero interest rates in an effort to prevent funds from flowing into the Swiss franc. The reason is that a strong Swiss franc could lower Switzerland's domestic inflation level and harm exports, which would not be favorable for Switzerland's economic growth. Data shows that Switzerland's Consumer Price Index (CPI) increased by 0% month-on-month in April, lower than the market's expected 0.2%. Last week, Swiss National Bank Governor Martin Schlegel stated that the Swiss franc's appreciation trend was very significant, and policymakers were ready to intervene in the foreign exchange market if necessary to maintain price stability. He emphasized that policymakers would not shy away from negative interest rates if needed, even though it would bring pain to the financial system. It is worth noting that the strengthening of the Swiss franc has put the Swiss National Bank in a dilemma, forcing policymakers to choose between the headache of negative interest rate policies and intervening in the foreign exchange market. Swiss National Bank intervention in the foreign exchange market could provoke dissatisfaction from the US. During Trump's first presidential term, the US had previously labeled Switzerland as a currency manipulator. Among the 20 survey participants, only Melanie Debono, an economist at Pantheon Macroeconomics, believed that the Swiss National Bank would cut interest rates by 50 basis points to -0.25% as early as June. Goldman Sachs, Nomura Securities, and S&P Global Markets expect Switzerland's benchmark interest rate to reach -0.25% by September. However, most respondents believe that the Swiss National Bank's rate-cutting cycle will end in June. Furthermore, surveyed economists forecast an average inflation rate of 0.4% for Switzerland in 2025, in line with the Swiss National Bank's recent predictions, which may provide some comfort to policymakers. Economists also do not expect a significant slowdown in Swiss economic growth, maintaining previous forecasts of a 1.1% growth rate for this year, followed by 1.4% in 2026, and 1.6% in 2027.