Swiss National Bank Has No Target for Franc Exchange Rate, Schlegel Says

(Bloomberg) — The Swiss National Bank has no target for the franc exchange rate, Vice President Martin Schlegel said less than a week after policymakers wrong-footed markets by cutting interest rates to stem the currency’s gains.

“The National Bank monitors the exchange rate closely and intervenes in the foreign-exchange market as necessary,” Schlegel said late Wednesday, repeating the SNB’s longstanding position as regards the franc.

He reiterated that the instrument will remain in the SNB’s toolbox, alongside changes to interest rates.

The SNB’s surprise decision was the first reduction in borrowing costs by a Group-of-10 central bank following the global inflation shock, with outgoing President Thomas Jordan saying he sees “very little risk” that price gains will rebound past the 2% upper end of the institution’s target range.

The SNB had allowed the franc to appreciate to shield the economy from importing rising costs as inflation shot up around the world. Such tolerance was exhausted, however, when the currency reached an all-time high against the euro in the final days of 2023. Following the rate cut, it’s tumbled to its lowest level since last June.

Addressing local businesspeople in St. Gallen, Switzerland, Schlegel declined to comment on speculation that he may take over at the helm of the SNB when Jordan leaves in September.

Discussing the collapse of Credit Suisee, he urged an overhaul of rules in the sector.

“Lessons need to be drawn from the crisis at CS, and financial regulation should be changed,” Schlegel said.

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