Reflecting on the Depreciation of the Swiss Franc

■ The Swiss National Bank (SNB) kept its policy rate unchanged at 0.00% for the fourth consecutive meeting on March 18, maintaining its stance of intervening to curb the appreciation of the Swiss franc.  
■ If the market reaffirms low and stable inflation and economic resilience, the Swiss franc is expected to find a bottom and rebound against the US dollar and the euro. 
 
The SNB announced on March 18 that it would keep its policy rate unchanged at 0.00% for the fourth consecutive monetary policy meeting. The statement noted that medium-term inflationary pressures have not changed substantially compared to the previous policy decision on March 19. Although the Consumer Price Index (CPI) rose faster in May to 0.6% year-on-year due to rising oil product prices, other goods and services did not contribute to the increase in the inflation rate. The SNB stated that the current monetary policy helps keep inflation within a range consistent with price stability while supporting economic development. To ensure price stability, it will continue to closely monitor developments and adjust monetary policy as necessary; it also stated that it will take more proactive measures to intervene in the foreign exchange market to address the rapid and excessive appreciation of the Swiss franc (CHF) that may threaten price stability. 

 
SNB notes that despite the ongoing conflict in the Middle East, Swiss economic activity remains robust. Global economic growth is expected to slow slightly in the coming quarters, which will also somewhat dampen Swiss economic growth, but monetary policy will play a supporting role. Although unemployment has risen, the global economic recovery is expected to be beneficial in the medium term. SNB projects Swiss GDP growth to be around 1% in 2026 and around 1.5% in 2027. Regarding the economic outlook, key risks include a renewed deterioration in the situation in the Middle East, which could significantly drag down the global economy, as well as the appreciation of the Swiss franc and continued uncertainty stemming from US trade policies. 

 
The Swiss franc peaked against the US dollar in January (0.7603 francs to 1 US dollar) and against the euro in March (0.8979 francs to 1 euro), and has since shown a continuous weakening trend. Although the Swiss franc has maintained a high level against the Japanese yen after reaching a record high of 204.42 yen in April, it remains some distance from the important psychological level of 205 yen due to market caution regarding potential Japanese government intervention. The divergence in monetary policy direction between major central banks and the SNB, as well as the SNB's foreign exchange intervention by selling Swiss francs, have both contributed to the depreciation of the Swiss franc. If the Swiss franc continues to weaken, it will increase inflationary pressures by pushing up import prices, but the SNB believes the impact of rising energy prices will gradually diminish over time. The SNB projects the Consumer Price Index (CPI) to rise by 0.6% in both 2026 and 2027, and by 0.7% in 2028. If the market once again recognizes the low and stable inflation environment and economic resilience, the Swiss franc exchange rates against the US dollar and the euro are expected to gradually bottom out and further test the potential for a rebound.