The Swiss National Bank (SNB) has reaffirmed its commitment to using both interest rates and currency interventions to guide monetary policy, despite potential scrutiny from the United States. Chairman Martin Schlegel emphasized that the central bank remains focused on maintaining price stability in Switzerland, even if it risks being labeled a “currency manipulator.”
U.S. Scrutiny Over Currency Interventions
Switzerland was previously designated a currency manipulator by the U.S. Treasury in 2020 under the Trump administration. At the time, U.S. officials argued that the SNB had actively intervened in foreign exchange markets to weaken the Swiss franc and gain a trade advantage. However, Swiss authorities defended their actions, stating that they were not attempting to manipulate the currency for trade benefits. By 2023, Switzerland was removed from the Treasury’s watch list after extensive discussions on its monetary policy approach.
SNB’s Commitment to Price Stability
Chairman Martin Schlegel reiterated the SNB’s mandate to ensure price stability in Switzerland. Speaking to a Swiss newspaper, he explained that the central bank has multiple tools at its disposal, including interest rate adjustments and currency interventions.
“We have different levers to achieve this goal—interest rates and the exchange rate. We are sticking with this concept,” Schlegel stated.
The chairman dismissed the notion that the SNB has been adjusting its approach in response to potential U.S. criticism. Instead, he emphasized that the bank’s primary monetary policy tool is the SNB policy rate, with foreign exchange market interventions used as supplementary measures when necessary.
Potential Consequences of Currency Manipulation Designation
If Switzerland were once again labeled a currency manipulator, it could face economic penalties from the U.S., including restrictions on government procurement contracts. Such a designation could also increase diplomatic tensions between the two nations and impact investor confidence in the Swiss financial system.
However, Schlegel made it clear that the SNB will not hesitate to act in Switzerland’s best interest. He stated that the central bank would continue to monitor economic conditions and adjust policies accordingly, even if it leads to further scrutiny from international regulators.
The Role of Negative Interest Rates
Schlegel also acknowledged that the SNB would consider reintroducing negative interest rates if necessary to prevent the Swiss franc from becoming too strong or to avoid inflation from dropping too low. Negative interest rates were a key policy tool for the SNB from 2014 until September 2022, helping to weaken the franc and boost economic growth.
While the policy was effective in managing currency appreciation, Schlegel admitted that it was unpopular among savers. “On the other hand, it’s clear that negative interest rates are not attractive for savers,” he said. “If we don’t have to, we won’t introduce negative rates again.”
Market Reaction and Broader Economic Impact
The financial markets have closely watched SNB policy developments, particularly given Switzerland’s role as a major global financial hub.
On the same day Schlegel’s remarks were published, U.S. stock markets ended a choppy trading session higher. The Dow Jones gained 1.4%, while the S&P 500 and Nasdaq both climbed approximately 1.6%. The broader market movements suggest that investors remain focused on macroeconomic factors, including central bank policies, inflation data, and geopolitical risks.
As the global economic landscape continues to evolve, the SNB’s approach to monetary policy will remain critical in maintaining Switzerland’s financial stability. Whether through interest rate adjustments or foreign exchange interventions, the central bank appears determined to act decisively in response to economic challenges, regardless of external pressures.