Swiss National Bank's Schlegel: Risk of strong upward pressure on the Franc persists
Swiss National Bank (SNB) Chairman Martin Schlegel is addressing the press conference post the June monetary policy assessment, in which the central bank held interest rates unchanged at 0%.
Key quotes
Swiss inflation has risen in recent months due to higher energy prices; mid-term inflationary pressure is unchanged
If necessary, we have an increased willingness to intervene in the forex market.
Rise in Swiss inflation has been less than in other countries; remains within the target range.
Our monetary policy continues to have expansionary effect.
Inflation will continue to rise slightly in coming quarters, before declining in first half of 2027.
Geopolitical uncertainties remain, risk of strong upward pressure on the Franc persists.
Uncertainty remains still elevated and energy markets are largely influenced by situation in the Middle East.
If necessary our readiness to intervene in forex market is higher, difficult to say if it is more or less than before.
We look at the whole situation when it comes to interventions, the Franc has weakened a bit since last meeting.
Many factors affect the exchange rate, the interest rate differential to ECB and our increased readiness to intervene.
Geopolitical, trade uncertainty is very high.
There are no plans for delisting of SNB.
The future development depends on the situation in the Middle East.
Can't be ruled out that this de-escalation in the Middle East is only temporary.
Market reaction
USD/CHF is holding modest gains at around 0.8000 following these comments.
Swiss Franc FAQs
The Swiss Franc (CHF) is Switzerland’s official currency. It is among the top ten most traded currencies globally, reaching volumes that well exceed the size of the Swiss economy. Its value is determined by the broad market sentiment, the country’s economic health or action taken by the Swiss National Bank (SNB), among other factors. Between 2011 and 2015, the Swiss Franc was pegged to the Euro (EUR). The peg was abruptly removed, resulting in a more than 20% increase in the Franc’s value, causing a turmoil in markets. Even though the peg isn’t in force anymore, CHF fortunes tend to be highly correlated with the Euro ones due to the high dependency of the Swiss economy on the neighboring Eurozone.
The Swiss Franc (CHF) is considered a safe-haven asset, or a currency that investors tend to buy in times of market stress. This is due to the perceived status of Switzerland in the world: a stable economy, a strong export sector, big central bank reserves or a longstanding political stance towards neutrality in global conflicts make the country’s currency a good choice for investors fleeing from risks. Turbulent times are likely to strengthen CHF value against other currencies that are seen as more risky to invest in.
The Swiss National Bank (SNB) meets four times a year – once every quarter, less than other major central banks – to decide on monetary policy. The bank aims for an annual inflation rate of less than 2%. When inflation is above target or forecasted to be above target in the foreseeable future, the bank will attempt to tame price growth by raising its 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. On the contrary, lower interest rates tend to weaken CHF.
Macroeconomic data releases in Switzerland are key to assessing the state of the economy and can impact the Swiss Franc’s (CHF) valuation. The Swiss economy is broadly stable, but any sudden change in economic growth, inflation, current account or the central bank’s currency reserves have the potential to trigger moves in CHF. Generally, high economic growth, low unemployment and high confidence are good for CHF. Conversely, if economic data points to weakening momentum, CHF is likely to depreciate.
As a small and open economy, Switzerland is heavily dependent on the health of the neighboring Eurozone economies. The broader European Union is Switzerland’s main economic partner and a key political ally, so macroeconomic and monetary policy stability in the Eurozone is essential for Switzerland and, thus, for the Swiss Franc (CHF). With such dependency, some models suggest that the correlation between the fortunes of the Euro (EUR) and the CHF is more than 90%, or close to perfect.
Author
Dhwani Mehta
FXStreet
Residing in Mumbai (India), Dhwani is a Senior Analyst and Manager of the Asian session at FXStreet. She has over 10 years of experience in analyzing and covering the global financial markets, with specialization in Forex and commodities markets.
