Schlegel defends currency interventions alongside policy rates
Swiss National Bank (SNB) Chairman Martin Schlegel said foreign exchange interventions complement policy rates in safeguarding price stability. The franc's safe-haven role amplifies external shocks: it gained more than 4 percent within five days of the April 2025 US tariff announcement.
Two tools for price stability
Speaking at The SNB and its watchers conference in Zurich, Schlegel described a strategy combining a medium-term inflation range of 0–2 percent, a conditional inflation forecast and appropriate monetary conditions.
The policy rate remains the main tool; currency interventions supplement it when necessary.
In 2021, the SNB reduced foreign-currency purchases and allowed franc appreciation to curb imported inflation.
It began raising rates in June 2022, initially by 50 basis points.
By June 2023, the rate reached 1.75 percent, an increase of 2.5 percentage points within one year.
Foreign-currency sales from the second half of 2022 through end-2023 totaled CHF 161 billion, almost 20 percent of GDP.
Schlegel said the combined tightening restored inflation to the price-stability range.
Safety brings appreciation pressure
Switzerland sells more than half its output abroad and imports more than half the goods it consumes.
Stability lowers borrowing costs but attracts safe-haven flows, particularly when global rates are low.
From summer 2007 to summer 2011, the franc appreciated more than 40 percent in nominal effective terms.
Facing deflation risks, the SNB announced currency purchases in March 2009 and set a minimum euro exchange rate in September 2011, backed by a commitment to unlimited purchases.
The exchange rate matters
Schlegel said exchange rates affect import prices directly and aggregate demand indirectly; imports comprise a quarter of Switzerland's consumer basket.
After one year, rate increases reduce output and inflation.
SNB estimates put the output effect above those for the United States and euro area.