Further interest rate cuts may be required in the coming quarters

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 level of interest rates and exchange rates. For the SNB, price stability means an increase in the Swiss consumer price index (CPI) of less than 2% per year.

The Governing Council of the Swiss National Bank (SNB) decides the appropriate level of its policy rate according to its objective of price stability. When inflation is above target or is expected to be above target in the near future, the bank will try to control excessive price increases by raising the 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. Conversely, lower interest rates tend to weaken the CHF.

Yes. The Swiss National Bank (SNB) has regularly intervened in the foreign exchange market to prevent the Swiss franc (CHF) from appreciating too much against other currencies. A strong CHF hurts the competitiveness of the country’s strong export sector. Between 2011 and 2015, the SNB implemented a peg to the euro to limit the CHF’s advance against it. The bank intervenes in the market using its considerable foreign exchange reserves, usually by buying currencies such as the US dollar or the euro. During episodes of high inflation, especially due to energy, the SNB refrains from intervening in the 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 carry out its monetary policy assessment. Each of these assessments results in a monetary policy decision and the publication of a medium-term inflation forecast.