A senior official at the Swiss National Bank has signaled readiness to push interest rates back below zero if necessary to keep inflation within its target band, while also cautioning that artificial intelligence investment could exert short-term upward pressure on prices.

In an interview with Swiss newspaper Finanz und Wirtschaft on August 21, Petra Tschudin, a member of the SNB's policy committee, stated unequivocally: "If it becomes necessary to lower rates below zero to keep inflation between 0% and 2% over the medium term, we will do so."

Acknowledging that the mechanics of negative rates differ from positive territory, Tschudin nonetheless stressed that "this does not constrain us." The remarks represent the Swiss central bank's most direct public statement to date on revisiting sub-zero borrowing costs.

The SNB cut its benchmark rate to zero last year and has held it there since. Swiss inflation remains stubbornly subdued, with July's reading at just 0.4% even amid a global energy price surge triggered by the Iran conflict.

Tschudin also pointed out that massive AI-related investment is redirecting capital flows across the economy, which could temporarily lift prices through shortages of resources such as chips. Over the longer term, however, whether productivity gains translate into sustained disinflation remains an open question, she noted.

Negative Rate Option Back on the Table

The Swiss National Bank's benchmark rate currently sits at zero.

Officials had previously projected the rate would remain unchanged until 2027 absent a fresh external shock, a view broadly aligned with economist forecasts. Yet recent data has introduced fresh uncertainty into the policy outlook.

The Swiss government reported second-quarter economic growth that beat expectations by a factor of five, while wages are also projected to keep climbing. Tschudin declined to comment directly on these figures, emphasizing that the SNB does not offer forward guidance. "In recent years, we have repeatedly been surprised by new external shocks, making it very difficult to provide detailed information about the future monetary policy path in advance," she said.

Tschudin noted that currency intervention and policy rate adjustments follow the same underlying logic, centered on assessing whether relevant price developments have materially impacted the inflation forecast and thus endangered monetary policy objectives.

She stressed that the policy rate remains the primary instrument, operating through its influence on bank rates, capital market financing costs, and the exchange rate.

AI Could Create Inflationary Pressures Short Term, Long-Term Impact Uncertain

Tschudin adopted a cautious stance on the relationship between artificial intelligence and inflation.

The influx of AI-related investment is reallocating capital within the economy, potentially triggering localized adjustments and frictions — such as chip shortages driving up prices — thereby creating upward inflationary pressure in the short to medium term, she explained.

However, she expressed skepticism about AI's ability to durably suppress inflation. "Productivity improvements are not a new phenomenon in themselves, and they do not automatically push an economy into structural deflation," she said.

Since inflation is calculated on an annual basis, price declines would need to be sustained and repeated to produce a deflationary effect — "is that realistic?" she questioned.

Her assessment echoes a warning from International Monetary Fund Chief Economist Silvana Tenreyro, who in research published by the Bank of England the previous day argued that even AI-driven productivity gains may not necessarily lower inflation.

Inflation Projections Not a Rate Path Promise

Tschudin specifically cautioned that the public should not interpret the central bank's inflation forecasts as an implicit commitment to a particular interest rate trajectory.

The SNB's latest projections show inflation remaining within the 0% to 2% target range through the first quarter of 2029. "Conditional inflation forecasts should not be read as an indication that rates will stay at current levels for three years; we do not publish rate projections," she said.

She emphasized that the forecast assumes rates remain unchanged, and that the central bank will adjust monetary policy accordingly should new inflation-relevant information emerge.

This formulation implies that while the SNB currently holds rates steady, its policy direction remains open in both directions — neither ruling out further cuts or a return to negative rates, nor closing the door on potential hikes down the line.