SNB president Thomas Jordan. — Bloomberg
ZURICH: Swiss National Bank (SNB) president Thomas Jordan says the franc’s strength is what plays a key role in keeping inflation low compared with the United States and the eurozone.
The fact that price growth never exceeded 3.5% in recent years was mostly down to the country’s exchange-rate policies, Jordan told business representatives at an event held on Tuesday in Schwyz, Switzerland.
By comparison, inflation in the United States peaked at 9.1% in 2022.
And it reached a high of 10.6% in the eurozone that same year.
“If you want to protect yourself against imported inflation, then the franc must appreciate,” the SNB president pointed out.
That’s why the central bank stopped buying foreign currencies to counteract franc inflows in 2022.
It even reduced its holdings of them through to the end of 2023, the SNB president added.
Jordan, who’s due to leave his post next month, said the franc’s appreciation allowed the SNB to raise interest rates less drastically than its developed-market peers.
The Swiss central bank raised its policy rate to 1.75% before starting to ease in March. The European Central Bank, under president Christine Lagarde, and the US Federal Reserve, under chairman Jerome Powell, hiked borrowing costs to much higher peaks.
Still, worries about the Swiss currency’s traditional allure as a safe haven for investors persist.
The biggest lobby group in the country for manufacturers has urged the Swiss bank to intervene to stop further franc strengthening, which they said hurts exports.
The Swiss franc has recently stabilised, though, having surged before on worries about a potential US recession and turmoil in Japanese.
Analysts and markets diverge on how this affects the path for Swiss rates.
With the majority of economists surveyed by Bloomberg expecting only one more 25 basis-point cut to come in September, to 1%, traders are betting on more loosening. — Bloomberg
