The chairman of the Swiss National Bank (SNB), Martin Schlegel, highlighted that the bank is aware of the negative impacts of negative interest rates. In his interview with Migros-Magazin, he stressed that there needs to be a strong reason before such a policy is put in place. He also mentioned that uncertainty over US tariffs is hurting the economy. Even though discussions continue, markets seem to have adjusted, and no further interest rate cuts are anticipated for the remainder of the year.

Switzerland’s Monetary Policy Stability

Chairman Schlegel’s comments indicate that the SNB plans to keep its current stance. The latest data from August 2025 show Swiss inflation steady at 1.6%, which means there is no pressure to lower interest rates further. This signals that the current policy is likely to remain unchanged for the foreseeable future. Historically, the SNB was aggressive in cutting rates, starting in March 2024 and lowering them to 1.00% as recently as February 2025. That period of rate cuts is now over. This stability makes the Swiss franc less attractive for cheap funding in currency trades against higher-yielding currencies. For those trading derivatives, this suggests that the implied volatility in Swiss franc pairs will be lower. With the central bank hinting at stability, the chances of sudden policy changes in the near future are slim. This setting favors strategies that thrive in stable markets, such as selling strangles on EUR/CHF.

Concerns Over US Tariff Uncertainty

US tariff uncertainty presents a major external risk, especially after reports surfaced last week about potential new tariffs on European industrial products. This issue is likely to prevent significant appreciation of the franc, suggesting the currency will remain within a predictable range. As a result, traders should be cautious about purchasing far out-of-the-money call options on the franc. This perspective is already reflected in the interest rate futures market, where current prices show that traders believe there is less than a 10% chance of another SNB rate cut by the end of 2025. The market has absorbed the SNB’s message, so traders should prepare for continued stability through the autumn. Create your live VT Markets account and start trading now.

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