Swiss National Bank sees no need to change rates despite Iran risks
- SNB Chair Martin Schlegel said Swiss inflation remains comfortably within the 0%-2% price stability range.
- The war in Iran and geopolitical tensions continue to cloud the economic outlook.
- The Swiss economy is performing well, while the Swiss Franc has remained stable in real terms since 2020.
Swiss National Bank (SNB) Chair Martin Schlegel sees no need to adjust monetary policy at this stage, as inflation remains within the central bank's 0%-2% price stability range. "We remain comfortably within the price stability range of 0% to 2%," Schlegel said, according to Reuters, adding that the central bank therefore sees no need to change its monetary policy for now.
However, Schlegel cautioned that the economic outlook remains subject to significant uncertainty, particularly due to geopolitical tensions surrounding the ongoing war in Iran. The conflict remains a source of risk for the inflation outlook and could complicate future monetary policy decisions.
On the domestic front, Schlegel struck an upbeat tone, saying that the Swiss economy is currently performing "very well." He also played down the Swiss Franc's (CHF) recent depreciation, noting that the currency has remained broadly stable since 2020 when adjusted for inflation.
Market reaction
Schlegel's comments have had no significant impact on the Swiss Franc, with USD/CHF trading around 0.8340 at the time of writing on Thursday, up 0.11% on the day.
SNB FAQs
The Swiss National Bank (SNB) is the country’s central bank. As an independent central bank, its mandate is to ensure price stability in the medium and long term. To ensure price stability, the SNB aims to maintain appropriate monetary conditions, which are determined by the interest rate level and exchange rates. For the SNB, price stability means a rise in the Swiss Consumer Price Index (CPI) of less than 2% per year.
The Swiss National Bank (SNB) Governing Board decides the appropriate level of its policy rate according to its price stability objective. When inflation is above target or forecasted to be above target in the foreseeable future, the bank will attempt to tame excessive price growth by raising its policy rate. Higher interest rates are generally positive for the Swiss Franc (CHF) as they lead to higher yields, making the country a more attractive place for investors. On the contrary, lower interest rates tend to weaken CHF.
Yes. The Swiss National Bank (SNB) has regularly intervened in the foreign exchange market in order to avoid the Swiss Franc (CHF) appreciating too much against other currencies. A strong CHF hurts the competitiveness of the country’s powerful export sector. Between 2011 and 2015, the SNB implemented a peg to the Euro to limit the CHF advance against it. The bank intervenes in the market using its hefty foreign exchange reserves, usually by buying foreign currencies such as the US Dollar or the Euro. During episodes of high inflation, particularly due to energy, the SNB refrains from intervening markets as a strong CHF makes energy imports cheaper, cushioning the price shock for Swiss households and businesses.
The SNB meets once a quarter – in March, June, September and December – to conduct its monetary policy assessment. Each of these assessments results in a monetary policy decision and the publication of a medium-term inflation forecast.
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