SNB Governing Board member Petra Tschudin said Swiss inflation remains low because inflation expectations are subdued and oil carries a relatively small weight in the Swiss consumer basket. She also said the Swiss National Bank is prepared to take interest rates below zero if necessary — a step the central bank has taken before, having kept its policy rate below zero from late 2014 until September 2022, including a long stretch at -0.75%.

Tschudin was commenting on the inflation and interest-rate outlook while stressing that the SNB is not signaling an unchanged policy path over the forecast horizon. She cautioned against reading the central bank's inflation forecast as a forecast for interest rates, noting that the SNB does not publish interest-rate projections and that its current inflation outlook should not be taken to mean rates will stay at their present level for three years. The three-year framing refers to the conditional inflation forecasts the SNB publishes at its quarterly monetary policy assessments, which assume a constant policy rate and are therefore not a commitment to one.

Her key comments included the view that artificial intelligence can increase inflation in the short term. She also said the franc has weakened because of higher interest-rate expectations abroad.

The remarks were dovish on monetary policy. Tschudin explicitly kept negative rates on the table and pushed back on the idea that the SNB's inflation forecast implies steady rates for an extended period. With Swiss inflation still low and the policy rate at 0%, she indicated the SNB retains room to ease policy if conditions warrant. Swiss inflation has been running near the lower edge of the SNB's 0-2% band for price stability. During its previous spell of negative rates, the SNB charged banks on sight deposits above exemption thresholds, a mechanism used to limit the side effects on bank profitability.

Her explanation for the recent weakness in the franc was also notable. She attributed it largely to higher interest-rate expectations outside Switzerland, which widen rate differentials against the franc. The franc has been trading near its strongest levels against the dollar in about a decade, and the SNB has a long history of responding to franc strength, including the foreign-exchange interventions it previously deployed to counter an overvalued currency.

Overall, the message was that the SNB remains flexible, with the policy bias tilted toward easing if inflation or economic conditions weaken further. The USDCHF moved higher on the comments and tested a swing area high between 0.8009 and 0.8018, as attention shifted back to the Swiss franc rather than USD moves this week. The next checkpoint for markets is the SNB's scheduled quarterly monetary policy assessment, where the Governing Board sets the policy rate and updates its inflation forecast.