Martin Schlegel, Chairman of the Swiss National Bank (SNB), stated on Friday that “a deceleration of economic activity in Switzerland is a distinct possibility.”
Further Remarks
The current trade environment is generating significant instability for all nations, including Switzerland.
While price stability cannot eliminate uncertainty stemming from trade policies, it remains critically important.
Trade policy has the potential to fragment the global economy.
The primary tool is the interest rate, but we also have the option of using foreign exchange interventions to manage monetary conditions.
USD/CHF’s Reaction to SNB Chairman Schlegel’s Statements
At the time of this report, USD/CHF is maintaining its upward momentum above 0.8300, showing a 0.45% increase for the session.
SNB FAQs
The SNB serves as Switzerland’s central banking authority. Functioning as an autonomous entity, its core mission is to uphold price stability over the medium and long run. To achieve this, the SNB endeavors to foster suitable monetary conditions, primarily through managing interest rate levels and exchange rates. The SNB defines price stability as an annual increase of less than 2% in the Swiss Consumer Price Index (CPI).
The SNB Governing Board determines the appropriate level for its policy rate in line with its objective of maintaining price stability. If inflation exceeds the target or is projected to do so, the bank will attempt to curb excessive price increases by raising the policy rate. Higher interest rates generally benefit the Swiss Franc (CHF) by creating higher yields, which makes the country a more appealing destination for investors. Conversely, lower interest rates tend to weaken the CHF.
Indeed. The SNB has frequently engaged in foreign exchange interventions to prevent excessive appreciation of the Swiss Franc (CHF) against other currencies. A strong CHF can negatively impact the competitiveness of Switzerland’s robust export sector. From 2011 to 2015, the SNB maintained a peg to the Euro to limit the CHF’s rise against it. The bank intervenes using its substantial foreign exchange reserves, typically by purchasing foreign currencies like the US Dollar or the Euro. During periods of high inflation, particularly driven by energy costs, the SNB tends to avoid market interventions, as a strong CHF makes energy imports more affordable, mitigating the price impact on Swiss households and businesses.
The SNB convenes quarterly – in March, June, September, and December – to assess its monetary policy. Each assessment culminates in a monetary policy decision and the release of a medium-term inflation forecast.
