Entitled “FX interventions as a form of unconventional monetary policy”, the paper states that “(foreign exchange interventions) of approximately 27 billion francs are necessary to prevent the Swiss franc from appreciating by 1.1%.”
“The effect is stronger the longer the central bank can commit to keep its policy rate constant in response to the inflationary effect of the interventions,” notes the paper authored by Tobias Cwik and Christoph Winter.
The franc has for years been one of the world’s strongest currencies. Through the early 2020s, the SNB spent heavily on forex to help prevent the safe haven currency from appreciating.
However, as inflationary pressure built after the COVID-19 pandemic, in 2022 the SNB began selling forex to strengthen the franc in a bid to lessen the impact of imported inflation.
With inflation now back within its target range of 0-2%, the bank last month cut its key interest rate for the first time in nine years, and has begun paring back foreign currency sales.
($1 = 0.9051 Swiss francs)
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