Swiss deflation fuels talks of negative interest rates: Is SNB ready?

Euronews

2 days ago

Remember negative interest rates? Back in early 2020, as the world grappled with the COVID-19 pandemic, central banks across advanced economies rushed to slash interest rates, offering cheaper borrowing to cushion the economic blow alongside unprecedented fiscal support.
In many countries, rates tumbled to near or even below zero — an extraordinary policy shift reflecting the urgency of avoiding a prolonged recession.
Fast forward five years, and no major economy currently operates with rates at or below zero. But Switzerland could soon change that.
Switzerland could soon become the first advanced economy to re-enter the era of negative interest rates.
A confluence of weakening price pressures and a subdued economic outlook has sparked growing expectations that the Swiss National Bank (SNB) will resume ultra-loose monetary policy, potentially cutting interest rates below zero in the coming months.
Last week, the Swiss Federal Statistical Office reported that consumer prices fell by 0.1% in May 2025 compared to a year earlier, marking the first deflationary print since March 2021. The decline was broad-based, with notable year-on-year contractions in transport costs (-3.7%), food and non-alcoholic beverages (-0.3%), healthcare (-0.2%), and household goods and services (-2.6%).
While a modest bout of deflation is not in itself alarming, it underscores the fragility of domestic demand and presents a challenge for the SNB's inflation target. The central bank defines price stability as annual inflation between 0% and 2%.
"Swiss inflation could remain close to 0%, which represents the lower end of the SNB's price stability range," said Niklas Garnadt, economist at Goldman Sachs.
The expert identified declining inflation expectations, falling energy prices, and potential trade frictions as downside pressures on the price outlook going forward.
The SNB, which currently holds its policy rate at 0.25%, meets on 19 June, and economists are expecting another rate cut of 25 basis points.
According to Goldman Sachs' base case, the SNB will lower its policy rate to -0.25% by September, in two successive cuts.
Yet, there is a 40% chance, the bank noted, that policymakers may opt for more aggressive easing, with two 50 basis point cuts taking the rate back to -0.75% — the lowest in its history.
Although the SNB also has foreign exchange operations at its disposal, economists expect interest rate cuts to take precedence in the near term.
There are some reasons for this preference, according to Goldman Sachs.
"The SNB has prior experience managing the impact of negative rates," Garnadt said.
Moreover, domestic inflation is more responsive to interest rates than currency movements.
And finally, Switzerland remains on the US Treasury's watchlist for currency manipulation, potentially constraining foreign-exchange intervention activity.
That said, foreign exchange interventions have not been ruled out entirely. During the post-2008 low-inflation years, the SNB frequently bought foreign currency to stem franc appreciation.
The SNB is again navigating familiar territory, balancing the need to support inflation against the risks of overreliance on unconventional measures.
While Switzerland's economic fundamentals remain relatively strong, the renewed threat of deflation could push the central bank to breach interest-rate lower bounds again.
Disney will pay Comcast's NBCUniversal nearly $439mn (€384.02mn) for its stake in Hulu, taking full control of the streaming service.
The move closes out an appraisal process that's dragged on for years. Disney said in November 2023 that it was acquiring a 33% stake in Hulu from Comcast for at least $8.6bn. That amount reflected Hulu's guaranteed floor value of $27.5bn, according to a regulatory filing.
Disney has run Hulu since 2019, when Comcast ceded its authority to Disney and effectively became a silent partner.
Hulu began in 2007 and quickly evolved into a service backed by entertainment conglomerates who hoped to stave off the internet with an online platform for their own TV shows.
Disney joined in 2009, planning to offer shows from ABC, ESPN and the Disney Channel. A decade later, Disney gained majority control of the business when it acquired 21st Century Fox.
Disney said in a regulatory filing on Monday that its appraiser arrived at a valuation below the guaranteed floor value during the initial phase of the appraisal process, while NBCUniversal's appraiser arrived at a valuation substantially in excess of the guaranteed floor value.
A third appraiser was brought in and concluded that The Walt Disney Co. will pay $438.7 million for the Hulu stake.
'We are pleased this is finally resolved. We have had a productive partnership with NBCUniversal, and we wish them the best of luck," Disney CEO Bob Iger said in a statement.
"Completing the Hulu acquisition paves the way for a deeper and more seamless integration of Hulu's general entertainment content with Disney+ and, soon, with ESPN's direct-to-consumer product, providing an unrivalled value proposition for consumers.'
Disney+ has already started to integrate the two services, which can be bought as a bundle with ESPN+ sports streaming.
The transaction is anticipated to close by 24 July. It will reduce Disney's net income in the third fiscal quarter, although it's not expected to impact Disney's prior guidance for fiscal 2025 adjusted earnings.
Shares in Disney rose around 1% in morning trading on Tuesday.