The Swiss National Bank kept its benchmark interest rate at 0% and signaled it’s ready to sell francs in currency markets, a strategy aimed at keeping the currency from strengthening too much. The decision, announced Thursday, leaves borrowing costs unchanged but opens the door for direct intervention to support exports.
Why the SNB is selling instead of cutting
Central banks typically lower rates to weaken a currency, but the SNB’s rate is already at zero. Moving negative would risk pushing the franc up further as investors flee to safety, something the bank wants to avoid. Instead, the SNB plans to sell francs — that is, buy foreign currencies — to actively push the exchange rate down. The tactic gives policymakers a tool to manage the franc without dragging rates into negative territory, where they could hurt commercial banks and savers.
What this means for Swiss exporters
A weaker franc makes Swiss goods cheaper for buyers abroad, which helps companies that sell machinery, chemicals, watches, and other products. Many Swiss exporters have struggled as the franc surged in recent years, eroding profits. By selling francs, the SNB aims to keep the currency’s value in check and protect those industries. The strategy is a familiar one for the central bank — it intervened heavily in currency markets after the 2015 euro peg collapse — but comes at a time when inflation in Switzerland remains low and the global economy faces headwinds.
The risks of playing in currency markets
Intervention carries its own dangers. Selling francs can fuel currency market volatility, as traders try to guess the SNB’s next move. The more the central bank sells, the more it accumulates foreign reserves, which can create balance-sheet risks if those currencies fall. There’s also the question of effectiveness: other central banks have found that direct intervention often provides only temporary relief, and the franc’s safe-haven status means it can surge again on the next geopolitical shock. The SNB acknowledged in its statement that the approach could increase economic uncertainty, though it gave no specifics on how large the sales might be.
The next test for the strategy will come when the SNB releases its quarterly monetary policy assessment in June, where it will update its inflation and growth forecasts. For now, the bank is betting that selling francs can keep the currency in check without resorting to deeper rate cuts. Whether that bet pays off depends on how global markets react — and whether the franc’s stubborn strength gives way.
