SNB Judged Franc Threat No Longer Needed as Haven Flows Ebbed
(Bloomberg) — The Swiss National Bank judged last month that its threat of franc sales wasn’t needed anymore after war-induced haven flows into the currency had subsided.
Officials revealed their thinking on why they dialed down their willingness to intervene in the currency at the Sept. 24 decision, in a summary of the discussion released on Thursday. They changed language in the statement to reflect that stance, while also keeping their interest rate at zero.
“Since the June monetary policy assessment, there had been little safe-haven demand for the Swiss franc,” the summary said. “An increased willingness to intervene is no longer necessary in the current environment.”
The outbreak of the Middle East war earlier in the year posed a challenge to the SNB as money flowing into the franc caused it to strengthen to decade-highs against the dollar and euro. Officials were forced to issue an unsolicited threat of intervention and sold the Swiss currency through the first half of the year.
The franc subsequently weakened to below levels it had held before the conflict, a phenomenon that policymakers reckoned at the most recent meeting to reflect the contrast in global outlooks for borrowing costs. They observed that the currency was about 3% lower in trade-weighted terms since the June decision.
“This depreciation was in line with the widened interest rate differentials between Switzerland and other countries, which — together with the low volatility of the Swiss franc exchange rate — increased the attractiveness of the franc as a funding currency in carry trades,” the officials observed.
That was because of varying responses by central banks to energy-stoked inflation caused by the war. While policymakers raised projections for consumer prices throughout their forecast horizon, those outcomes remained well within the SNB’s 0-2% target range.
Policymakers also tweaked their language on inflation, acknowledging that medium-term pressure had increased, though barely.
“There are still no signs of second-round effects, and core inflation has risen only slightly,” the officials said.
Consumer-price growth quickened in September. The inflation rate rose to 1% in September, the highest level in two years, stoked by oil prices and the franc’s depreciation.
That’s still far weaker than in surrounding countries, because of the insulating effects of the Swiss currency. On a harmonized basis, inflation in Switzerland was 1.2%, compared with 3.8% in the euro region.
©2026 Bloomberg L.P.
See more Swissinfo articles in your Google results. Learn more
