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The Swiss National Bank needs 27 billion francs for the appreciation of the currency

The Swiss National Bank needs 27 billion francs for the appreciation of the currency

Swiss National Bank logo
Swiss National Bank logo. Photo: Stefan Wermuth/Bloomberg

The Swiss National Bank (SNB) has to spend about 27 billion francs – about 5% of Swiss economic output – on foreign exchange interventions to prevent the national currency from rising by 1.1%. The central bank's purchases of foreign currencies are considered “effective and durable,” according to a study conducted by economists Tobias Kueck and Christoph Winter, and published by the Swiss Central Bank on March 28, according to Bloomberg. published had become. These transactions have helped Switzerland avoid a sharp decline in consumer prices in recent years.

The graphic shows the evolution of the Swiss Central Bank's foreign currency reserves

Purchasing foreign currencies has long been one of the Swiss National Bank's favorite tools for keeping exchange rates within permissible limits. However, central bankers usually keep a low profile when it comes to the timing and size of purchases. Swiss Central Bank President Thomas Jordan and his colleagues raised interest rates above zero last year. However, the central bank's balance sheet is still several times larger than it was ten years ago.

The Swiss National Bank's foreign currency reserves currently stand at around 680 billion francs. According to the study, if the Swiss National Bank had not implemented negative interest rates between 2015 and 2022, it would have had to spend up to 550 billion francs on foreign currency purchases in order to achieve the inflation rate actually recorded during this period.

FM: On March 21, the Swiss National Bank began cutting interest rates again much earlier than expected. The key interest rate fell from 1.75% to 1.50%. The euro against the Swiss franc has since risen from 0.9675 to 0.9746 currently, i.e. the depreciation of the franc.


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