The strong Swiss Franc is causing difficulties for Swiss industry according to Swiss National Bank (SNB) Chairman Thomas Jordan. This is in addition to weaker demand from other European countries, particularly Germany, which is a key market for Swiss industry. The exchange rate of the Swiss Franc does not make the situation any easier for the industry. Maintaining price stability is a crucial precondition for prosperity, and this is the mandate of the SNB.
The market reaction to the news was seen in the USD/CHF pair, which was down 0.03% on the day at 0.8471. The Swiss National Bank (SNB) is the country’s central bank, with a mandate to ensure price stability in the medium and long term. They aim to keep inflation in check, with a rise in the Swiss Consumer Price Index (CPI) of less than 2% per year. The SNB Governing Board determines the appropriate level of the policy rate based on the price stability objective. When inflation is above target, the bank may raise interest rates to curb price growth.
The SNB has intervened in the foreign exchange market to prevent the Swiss Franc (CHF) from appreciating too much against other currencies. A strong CHF can hurt the competitiveness of Switzerland’s export sector. The SNB implemented a peg to the Euro between 2011 and 2015 to limit the CHF’s advance. The bank uses its foreign exchange reserves to buy foreign currencies like the US Dollar or the Euro. During periods of high inflation, the SNB may refrain from intervening in the markets to allow for cheaper energy imports.
The SNB meets once a quarter to conduct its monetary policy assessment, resulting in a monetary policy decision and the publication of a medium-term inflation forecast. The bank’s interventions in the foreign exchange market are aimed at maintaining price stability and supporting the competitiveness of Swiss industry. While the strong Swiss Franc presents challenges for exporters, especially in the manufacturing sector, the SNB remains committed to its mandate of ensuring a stable and prosperous economy for Switzerland. In the face of external pressures, the SNB continues to monitor economic conditions closely and take appropriate actions to mitigate any adverse effects on the Swiss economy.
