The Swiss National Bank (SNB) reiterated its monetary policy stance, maintaining its key rate at 0 percent and rejecting calls for a return to positive rates, despite rising inflation, a weakening Swiss franc, and a recovering economy. The decision, announced during a media conference in Bern, came as the franc faced renewed scrutiny over its use in carry trades, which could amplify volatility in foreign exchange markets.
Critics had questioned whether the SNB’s inaction was prudent given the backdrop of inflationary pressures, a depreciating franc, and signs of economic recovery. Martin Schlegel, president of the SNB’s board, dismissed such concerns, emphasizing that the bank’s policy remained appropriate. He noted that while inflation risks were present, there had been no significant second-round effects from oil prices, and the Swiss economy remained in a phase of capacity underutilization with substantial growth potential. The franc’s depreciation was also factored into the decision, alongside the widening interest-rate differentials with other major currencies.
Petra Tschudin, a SNB board member overseeing market operations, clarified that there were no indications the low-yielding franc was being heavily exploited for carry trades, which could drive further currency depreciation. Antoine Martin, another board member focused on financial stability, reiterated his stance on the Swiss real estate market, stating that property valuations remained elevated relative to fundamental economic indicators. He also restated his longstanding call for tightening the SNB’s anticyclical capital buffer limits.
A focal point of discussion concerned the SNB’s stance on UBS’s foreign branch capital requirements. The Ständerat had recently approved a 90 percent capital adequacy standard for foreign subsidiaries, a move that Schlegel and Martin defended as a balanced approach. While Martin acknowledged that 100 percent would have been preferable from a financial stability perspective, he argued the 90 percent threshold was a pragmatic compromise.
Schlegel also addressed criticism from UBS Chief Executive Sergio Ermotti, who had previously accused the SNB of failing to flag the risks at Credit Suisse before its collapse. The SNB president emphasized that while the bank’s stability reports must provide accurate information, they must also avoid creating unnecessary uncertainty—a delicate balance. He expressed confidence that Switzerland’s legislative response to Credit Suisse would reinforce financial resilience.
The SNB’s decision underscored its cautious approach to monetary policy, balancing inflation control with economic stability amid a complex global backdrop.
