The Swiss National Bank (SNB) kept its benchmark interest rate at 1.25% on Thursday, a move fully anticipated by financial markets, but Vice Chairman Martin Schlegel’s separate warning about persistent franc appreciation added a cautious tone to the outlook.
In its policy statement, the SNB highlighted that inflation, still at 2.3% year-on-year in May, remains above its 0–2% target, though it is expected to ease gradually. It recognized headwinds from a strong currency and sluggish global demand, especially from the eurozone. The central bank repeated its readiness to intervene in foreign exchange markets to prevent excessive franc strength.
Immediately after the announcement, the franc edged lower—EUR/CHF rose to 0.9550 from 0.9520 and USD/CHF climbed to 0.8900 from 0.8870—signaling that the hold decision had been priced in. Market participants noted a slightly more dovish language, which lifted expectations of a possible rate cut at the September meeting.
Speaking at a Zurich event, Schlegel stressed that the franc’s safe-haven status attracts capital flows during global uncertainty, creating a structural risk of sharp upward pressure. He said the SNB’s intervention toolkit—including negative rates and currency purchases—remains available, but acknowledged that sustained investor demand can diminish their impact.
The appreciation threat directly hits Swiss exporters of machinery, chemicals, and precision instruments, while tourism faces a cost disadvantage. For investors, Schlegel’s remarks underline elevated currency risk, making hedging a relevant consideration. The SNB’s steady rate decision, paired with warnings of franc strength, reflects a delicate balancing act between inflation control and supporting the export-reliant economy.
