The Swiss National Bank (SNB) sold 22.3 billion Swiss francs ($23.97 billion) worth of foreign currencies interventions last year, according to the central bank’s annual report published on Tuesday. This is a reversal from the previous year, in which the SNB bought 21.1 billion francs.
The SNB has regularly confirmed its commitment to foreign currency interventions, but until last year, this mainly meant buying foreign currencies with newly created francs to stem the rise of the Swiss franc. The central bank aims to dampen Swiss inflation, which was at 2.8% in 2022, outside its target range of 0-2%.
The SNB’s intervention in the foreign currency market is aimed at keeping the Swiss franc from appreciating too rapidly, which could harm Switzerland’s export-oriented economy. By selling francs and buying foreign currencies, the SNB increases the supply of francs and decreases the demand for the currency, which can help to weaken its value.
The central bank has been actively involved in the foreign exchange market since the early 1970s. It began buying foreign currencies in the 1980s to prevent the appreciation of the franc against other currencies. This practice has continued, and the SNB has accumulated large foreign currency reserves as a result.
In recent years, the SNB has faced criticism for its foreign currency interventions, with some arguing that the bank is artificially suppressing the value of the franc to boost exports. However, the SNB has maintained that its interventions are necessary to prevent deflation and support the Swiss economy.
In addition to its foreign currency interventions, the SNB also conducts monetary policy through interest rates and other measures. The central bank’s interest rate currently stands at -0.75%, one of the lowest in the world, and it has indicated that it has no plans to raise rates in the near future.
In conclusion, the SNB’s decision to sell 22.3 billion Swiss francs in foreign currencies interventions last year signals a shift from its previous buying trend. The central bank’s commitment to foreign currency interventions remains strong, and it will likely continue to buy and sell foreign currencies as needed to achieve its goal of dampening Swiss inflation.