Swiss National Bank (SNB) Chairman Martin Schlegel has acknowledged the difficulties posed by Switzerland’s low inflation and current interest rate environment. With inflation at a mere 0.1% and interest rates at 0%, Schlegel stated that the situation presents unique challenges for monetary policy. The SNB, as the central bank of Switzerland, is primarily concerned with maintaining price stability, aiming for an inflation rate between 0-2%.
Schlegel highlighted the SNB’s existing policy tools, including interest rates and currency market interventions, for steering inflation within the target range. While the SNB has previously indicated a readiness to explore negative interest rates, Schlegel noted that the threshold for implementing such measures remains high. The SNB previously used negative rates from late 2014 to 2022, a policy that proved unpopular with lenders and savers.
Instead of immediately resorting to negative rates, the SNB will closely monitor the situation, particularly the exchange rate of the Swiss franc, and intervene in the foreign exchange markets if necessary. Schlegel anticipates a rise in Swiss inflation in the coming months and believes current monetary conditions in Switzerland are appropriate. He also noted that U.S. Treasuries remain the most liquid market for central banks holding foreign currency reserves, despite the recent decline in the U.S. dollar.
Schlegel refrained from commenting on the actions of other central banks or sovereign wealth funds but emphasised the need for liquidity in currency reserves. The SNB’s focus remains on ensuring price stability and navigating the complexities of the current economic landscape through careful monitoring and strategic interventions.
