Introduction
The Swiss National Bank (SNB) has announced its commitment to intervene in foreign currency markets when necessary to maintain inflation stability, particularly following recent scrutiny from the U.S. regarding its currency practices.Context
The U.S. Treasury added Switzerland to a watchlist aimed at monitoring countries for unfair currency and trade practices. In response, the SNB firmly denied any accusations of currency manipulation, highlighting its focus on safeguarding national interests amidst recent inflation challenges caused by a strong Swiss franc.Developments
The SNB emphasized that it does not manipulate the Swiss franc to alter trade balances or secure undue advantages for the Swiss economy. In order to keep inflation within its target range of 0-2%, the SNB is prepared to continue using monetary policy tools such as interest rate adjustments and forex market interventions.In May, Swiss inflation reached a four-year low, with prices declining by 0.1%. Although the SNB has engaged with U.S. authorities to clarify Switzerland's economic stance and monetary policy, it remains uncertain whether further discussions with the U.S. are forthcoming.
While Switzerland has addressed some concerns regarding trade flows and its current account, it has not met expectations concerning foreign currency interventions. According to the U.S. Treasury, the SNB's foreign exchange purchases in 2024 were minimal, representing only $1 billion and less than 0.1% of Swiss GDP, considerably beneath the Treasury's stipulated 2% threshold.