Swiss National Bank Prioritizes Mid-Term Price Stability, Tschudin Says

The Swiss National Bank is focused on achieving price stability over the mid-term, according to Tschudin. The central bank conducts monetary policy independently and is responsible for maintaining price stability. It also provides banknotes and coins, manages international reserves, and compiles statistical information. The bank is divided into three departments in Zurich and Bern.

The Swiss National Bank (SNB) is poised to make a significant move in its monetary policy following recent economic data that has sparked concerns about deflation. The central bank is expected to cut interest rates further, potentially bringing its key rate to zero or even negative levels, as it aims to maintain price stability over the mid-term.

In May, Swiss consumer prices were in deflationary territory, with annual inflation falling to -0.1% compared to the same month last year. This marks the first time Switzerland has recorded deflation since March 2021 [2]. The Swiss Franc (CHF) has been gaining strength as a safe-haven currency, driven by increased demand due to geopolitical uncertainty and the U.S. trade policy [1].

The SNB, led by Chairman Martin Schlegel, has previously indicated that it would not be guided by individual monthly inflation prints but rather by price stability to decide on policy. With the bank's current key interest rate at 0.25%, and inflation expectations averaging at 0.4% for the year, the central bank is under pressure to act [2].

Investors are leaning toward a rate cut at the SNB's June 19 meeting, with some predicting a more significant cut to -0.25%. This would follow a series of rate cuts from 1.75% in early 2024, as inflation declined sharply from the 3.5% seen in mid-2022. The deflationary trend, driven by falling prices for imported products and the rise in the franc against other currencies, is likely to prompt the SNB to take further action [2].

The SNB's focus on price stability is crucial, given the Swiss economy's dependency on the neighboring Eurozone. The bank's independence and responsibility for maintaining price stability, providing banknotes and coins, managing international reserves, and compiling statistical information underscore its importance in the Swiss financial landscape [1].

References:
[1] https://www.fxstreet.com/news/usd-chf-drops-to-near-08200-due-to-increased-safe-haven-demand-202506020611
[2] https://www.marketscreener.com/quote/currency/EURO-SWISS-FRANC-EUR-CHF-4594/news/Switzerland-Records-Deflation-for-First-Time-in-Four-Years-Update-50138874/