In Q3 2024, the Swiss National Bank (SNB)’s foreign currency purchases surpassed 700 million francs, shaping economic strategies and market trends.
In a striking display of monetary maneuvering, the Swiss National Bank (SNB) has once again engaged in substantial foreign currency acquisitions, amassing a staggering 728 million francs during the third quarter of 2024. This revelation, unveiled through the latest SNB statistics, underscores the central bank’s proactive approach in navigating the turbulent waters of global finance.
From July to September, the SNB’s foreign currency purchases marked a notable uptick from the 384 million francs acquired in the first half of the year. Such extensive interventions were anticipated, particularly in light of the dramatic global stock market downturn that transpired in early August, prompting a pronounced flight to safety among investors, with the Swiss franc emerging as a favored refuge.
In a notable reversal of strategy, the SNB resumed its foreign currency purchases at the beginning of the year, marking its first foray into this arena since the first quarter of 2022. Prior to this shift, the bank had predominantly acted as a seller, aiming to bolster the franc’s value in a bid to mitigate imported inflation—a phenomenon that surged post-pandemic and following the onset of the Ukraine conflict on February 24, 2022. For context, in 2022 alone, the SNB divested itself of foreign currency amounting to an impressive 22.3 billion francs, with total sales in 2023 nearing a staggering 133 billion francs.
However, the inflationary landscape has shifted dramatically, with recent data indicating a sharper-than-anticipated decline in inflation rates. In response, the SNB made the unexpected decision to lower the key interest rate by a substantial 0.5 percentage points, bringing it down to 0.5 percent just three weeks ago. Projections for 2025 now suggest a mere 0.3 percent inflation rate, a significant revision from the earlier forecast of 0.6 percent made in September. As SNB CEO Martin Schlegel noted, “Energy and oil prices in particular surprised us downwards,” highlighting the unpredictable nature of the current economic climate.
Looking ahead, the possibility of further interest rate reductions remains on the table as the SNB strives to maintain price stability within the target range of 0 to 2 percent inflation. Schlegel emphasized that interest rate adjustments would remain the central bank’s primary tool should monetary policy require further easing. Nevertheless, the SNB has not entirely ruled out interventions in the foreign exchange market, although recent statements have refrained from reiterating the notion that such interventions are a fundamental component of monetary policy.
Reflecting on the prelude to the Ukraine war, the SNB had previously engaged in extensive foreign currency purchases to stave off excessive appreciation of the Swiss franc. In 2020, for instance, the bank acquired nearly 110 billion francs in foreign currency, followed by an additional 21.2 billion francs in 2021. Thus, after interest rate policy, foreign exchange transactions remain a pivotal instrument in the SNB’s overarching monetary strategy.
