Leading global wealth manager UBS suggests that significant interventions by the Swiss National Bank (SNB) in the foreign exchange (FX) market are improbable under the central bank’s current policy framework. This assessment comes even as the strength of the Swiss franc has played a role in pushing domestic interest rates down to zero.
According to a research note authored by UBS economists Maxime Botteron, Florian Germanier, and Alessandro Bee, the primary reason for this unlikelihood is tied directly to the SNB’s operational setup. Following the SNB’s recent rate decision, the economists highlighted that the way the central bank’s policy rate is implemented is simply “not adapted for persistent foreign currency purchases.”
Their analysis concludes that, based on the current system, “systematic foreign currency purchases are unlikely at this stage.” This indicates that despite potential pressures on the Swiss franc exchange rate, the SNB’s existing monetary policy tools and implementation methods do not readily facilitate prolonged, large-scale FX intervention efforts, according to the UBS view.
