While many central banks are increasing interest rates , The Swiss National Bank (SNB) decided to keep interest rates at global record lows at -0.75% in today’s SNB policy meeting. This -0.75% rate has remained the same since the SNB decided to lower interest rates in January 2015 and remove the EURCHF peg setting that led to the Black Swan event.
The SNB has clearly taken a different direction compared to the monetary policies in other major world banks such as the Federal Reserve(FED), Bank of England (BoE) and Bank of Canada (BoC) which have raised interest rates in order to control the rise in inflation in their respective countries. Surprisingly, inflation in Switzerland is still at a normal level at 2.2%
The Swiss Franc (CHF) has been relatively strong and has been in demand during times of extreme uncertainty because of the demand by investors as a safe haven.
In a statement after today’s meeting, SNB Chairman Thomas Jordan stressed that the CHF is still at its highest level and they are ready to intervene if necessary to control its value. However, the market predicts the SNB will not intervene for now as inflation data is still under control in Switzerland. The SNB also stated that the Ukraine-Russia conflict will cause energy (oil & gas) prices to continue to rise and they have reported a change in the forecast with inflation expected to rise to 2.1% before cooling back to 1.8% by the end of 2022, in line with the SNB’s inflation policy target in the range of between 0 – 2%.