Key insights
- SNB minutes reveal heightened uncertainty in the Swiss economic outlook due to the Middle East conflict. The central bank held rates steady and signaled readiness to intervene in currency markets to curb Swiss franc appreciation driven by safe-haven flows. Concerns exist that the conflict could curb global activity and pressure the franc higher, jeopardizing Swiss price stability. The SNB is closely monitoring potential second-round inflationary effects.
ZURICH, April 16 (Reuters) - Uncertainty over the economic outlook for Switzerland has risen due to the conflict in the Middle East and global developments pose the main risk for inflation, minutes of the Swiss National Bank’s latest rate-setting meeting showed on Thursday.
The SNB kept its policy rate on hold at zero in March amid uncertainty over the Iran war, and signalled increased readiness to intervene in currency markets to curb a surge in the Swiss franc fuelled by a flight to safety in the turmoil.
"The main risk to the economic and inflation outlook for Switzerland stems from developments in the global economy," the SNB minutes said. "In particular, the war in the Middle East could curb economic activity more strongly and increase upward pressure on the Swiss franc."
The franc climbed in early March to its highest level in 11 years against the euro, as inflows intensified by the U.S.-Israeli war on Iran pushed up the currency.
The minutes said that given the geopolitical situation and the associated flight to safe havens, the SNB’s willingness to intervene in foreign exchange markets should remain high in order to counter a rapid and excessive appreciation of the franc, which would jeopardise price stability in Switzerland.
On Wednesday, SNB Chairman Martin Schlegel said uncertainty about the Swiss inflation outlook is "quite high", and that close attention must be paid to whether second-round effects are triggered by the impact of the Middle East conflict.