Why Switzerland’s Central Bank No Longer Fights Every Franc Surge
The Swiss National Bank is adopting a more selective stance in managing the strength of the franc, signaling a departure from its once forceful interventions in currency markets.
Under President Martin Schlegel, who took office nearly a year ago, policymakers appear less focused on defending specific exchange-rate levels and more concerned with ensuring smooth movements in the market.
For decades, the franc’s role as a safe haven prompted the SNB to deploy aggressive tactics, from massive foreign-exchange purchases to the introduction of a currency cap in 2011. That ceiling was abandoned in 2015, but the bank continued to label the franc “overvalued” in policy statements until 2022 and relied on negative interest rates as low as -0.75%. The strategy ballooned the SNB’s balance sheet to over 1 trillion francs, leaving it vulnerable to steep valuation swings and political scrutiny when payouts to government coffers dried up.
Today, the approach looks different. Since early 2024, large-scale interventions have all but disappeared. Instead, the central bank has leaned on interest rate adjustments, cutting borrowing costs back to zero this summer to curb capital inflows. Officials now avoid describing the franc as excessively strong, even as it trades near decade-highs against both the euro and the dollar. Analysts say the bank is unlikely to burn through reserves again unless a sharp, disorderly spike in the currency threatens stability.
That doesn’t mean politics have vanished from the equation. The U.S. Treasury placed Switzerland back on its watchlist for currency manipulation this year, echoing pressures that surfaced during Donald Trump’s first term. Schlegel himself is no stranger to such tensions: as head of the SNB’s trading desk in 2015, he was on the front lines when the franc cap abruptly collapsed.
Communication is also becoming part of the toolkit. Later this month, the SNB will begin releasing summaries of its quarterly policy debates—a move meant to give investors clearer signals while reducing surprise-driven speculation. Economists say this added transparency could prevent markets from overestimating the likelihood of interventions.
For now, the franc’s resilience has been tolerated, even after Trump’s tariff announcements triggered brief surges earlier this year. Analysts at UBS and JPMorgan believe the central bank is willing to step in as a “wave-breaker” if volatility becomes extreme but will otherwise leave exchange rates to market forces. Still, with inflation slipping to just 0.2%, some forecasters warn that negative rates could return sooner than expected if disinflation deepens.
The SNB’s new doctrine—pick battles carefully, avoid constant confrontation—marks a striking shift for an institution long defined by its fight against the franc’s strength. Whether it can hold to this more measured strategy will depend on how markets, global politics, and inflation risks unfold in the months ahead.
Source: Bloomberg
The information provided in this article is for educational purposes only and does not constitute financial, investment, or trading advice. Coindoo.com does not endorse or recommend any specific investment strategy or cryptocurrency. Always conduct your own research and consult with a licensed financial advisor before making any investment decisions.
Alex is an experienced financial journalist and cryptocurrency enthusiast. With over 8 years of experience covering the crypto, blockchain, and fintech industries, he is well-versed in the complex and ever-evolving world of digital assets. His insightful and thought-provoking articles provide readers with a clear picture of the latest developments and trends in the market. His approach allows him to break down complex ideas into accessible and in-depth content. Follow his publications to stay up to date with the most important trends and topics.
