By John Revill
BASEL, Switzerland (Reuters) -Swiss inflation could enter negative territory in the coming months, but this will not necessarily trigger a reaction by the Swiss National Bank, SNB Chairman Martin Schlegel said on Tuesday.
The SNB will not be guided by inflation data for individual months, but instead look at maintaining price stability over the medium term, Schlegel told an event in Basel.
“Even negative inflation figures cannot be ruled out in the coming months,” he said. “The SNB does not necessarily have to react to this. Our focus is not on the current rate of inflation, but rather on price stability over the medium term.”
Swiss inflation eased to 0% in April, at the bottom end of the SNB’s 0-2% target range, which it calls price stability.
The figure, the lowest reading for four years, has fuelled market expectations the SNB will cut its benchmark rate from the current 0.25% at its next monetary policy meeting on June 19.
Markets currently price in a 75% probability the SNB will cut the rate 25 basis points to zero. They give a 25% chance the central bank will go for a 50 basis point cut to minus 0.25%.
By focusing on the medium term rather than short term peaks and troughs, the SNB could act with a “steady hand” in deciding monetary policy, the SNB chairman said.
However, the bank would not hesitate to act if necessary, he said, with the SNB’s policy rate its main tool. Currency market interventions could also be an important instrument, he added.
Schlegel also said trade uncertainties are currently high due to the tariff policies pursued by the U.S. government.
(Reporting by John RevillEditing by Dave Graham)
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