Martin Schlegel, Chairman of the Swiss National Bank, expressed concerns about inflation uncertainty affecting foreign currency management. The SNB’s primary tool remains the policy rate, and intervention in the FX markets is an option if needed to ensure price stability.

Switzerland’s economic growth in 2025 is predicted to underperform expectations. Presently, uncertainty is high, leading the Swiss franc to be regarded as a safe haven, despite unclear inflation outlooks.

Domestic services are driving current inflation, while foreign influences are negative. The Swiss franc attracts both domestic and foreign buyers, yet uncertainty hampers growth prospects.

Gold And Interest Rates

Gold’s presence on the balance sheet is not deemed advantageous in large quantities. Without alternatives to US Treasuries, the SNB cannot dismiss the possibility of negative interest rates, although past usage was effective.

Switzerland maintains it is not manipulating its currency, intervening solely to prevent the franc’s overvaluation. The nation’s actions aim to fulfil its mandate without securing competitive advantage.

Schlegel’s recent remarks brought monetary policy back into sharper focus, especially regarding currency exposure and how best to manage it under persistent price uncertainty. With inflation remaining hard to predict, monetary officials continue to lean on policy rates as the steering instrument. Foreign exchange market interventions remain a backup method, considered only when price targets might be at risk from erratic currency moves.

Economic projections for next year are on the cautious side. Output is expected to fall short, and that sentiment reflects the churn investors are already anticipating. When macro conditions become less predictable, we often notice a move towards perceived financial safety – in this case, the Swiss franc. Even with domestic inflation being pushed largely by the services sector, rather than rising import costs, risk aversion continues to guide flows into the currency, particularly when overseas inflation dynamics remain soft or even disinflationary.

The franc’s dual attraction – local trust and international demand – tends to anchor it during periods of stress or doubt. Yet that same strength brings trade-offs. What keeps us alert is the balance between currency appreciation and export competitiveness. That tension isn’t new, but it is coming back into sharper relief now as longer-term growth forecasts remain subdued. The issue, really, is whether the franc’s role as a refuge can remain effective without harming wider economic momentum.

Reserves And Exchange Rate Moves

As for reserves, gold hasn’t regained ground as a major store of value on the central bank’s ledger. Instead, US Treasuries continue to dominate holdings, even as yields fluctuate and political risks add difficulty. If those assumptions were to change, reserve allocation strategies could follow, but as it stands there is little appetite for heavy gold positioning. The choices remain constrained. Importantly, there’s no current path that clearly reduces reliance on negative rates in extreme scenarios, even though their previous deployment has met policy goals. That doesn’t mean a sudden return, but that the door remains ajar.

The stance on exchange rate moves is straightforward. Currency levels are let to adjust unless sharp appreciation endangers price targets. Any steps taken in markets are not to boost exports or underprice goods. Instead, they’re defensive, tied strictly to ensuring monetary policy remains within target. This line of reasoning helps maintain credibility even as volatility climbs.

For those of us managing exposures driven by rates and currency shifts, the takeaway is relatively direct. Monitor policy paths not only in Switzerland but in forward-looking indicators emerging from other major economies. Adjust hedging where funding costs might compress or shift asymmetrically. Since volatility in safe-haven assets behaves differently when sentiment flips suddenly, watching rates volatility alongside implied vols in currency options might offer better guidance than broad indexes alone. Changes tend to show up there first, and reflect the tension between capital seeking safety and central banks protecting mandates.

Instruments further out on the curve may begin to show pressure if confidence in growth continues to slip. Pay extra attention to tweaks in forward rate agreements tied to Swiss franc benchmarks. Elevated cash demand, particularly at quarter transitions, could re-price short tenors again if the deposit environment shades down. Portfolio strategy should welcome flexible approaches again, with positioning light enough for swift movement but grounded in a framework that lets signals from central banks actually alter the trade stance, rather than just talk around it.

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