Swiss franc's slide driven by overseas rate outlook, SNB's Tschudin says

Petra Tschudin, one of the Swiss National Bank's newer Governing Board members, said the Swiss franc's recent weakness is largely a function of shifting expectations abroad rather than domestic factors. She attributed the move to higher anticipated interest rates outside Switzerland. As markets price in foreign central banks keeping borrowing costs elevated, the yield disadvantage of Swiss assets grows, reducing the appeal of holding francs. At its June 2026 monetary policy assessment, the SNB kept its policy rate at 0%, underscoring how little scope remains for conventional easing. Tschudin noted that the franc's depreciation since March 2026 has itself loosened monetary conditions in Switzerland. She also stressed the SNB is ready to act if currency moves become excessive. The central bank stands prepared to intervene in foreign-exchange markets if the franc shifts too far, too quickly in either direction, with particular attention on sharp appreciation that could push inflation lower and pressure Swiss exporters. On persistently low inflation, Tschudin pointed to two key reasons. Inflation expectations among households and businesses remain anchored at low levels, dampening wage demands and limiting pre-emptive spending. Oil also carries relatively little weight in Switzerland's consumer price basket, muting the impact of energy-price swings seen elsewhere. The SNB updated its projections at the June 2026 press conference, forecasting inflation to average 0.6% in both 2026 and 2027, rising to 0.7% in 2028. The estimates remain within the SNB's price-stability definition of annual CPI increases below 2%. Tschudin joined the Governing Board on Oct. 1, 2024, and heads Department III. Her remarks align with the SNB's established approach: rely on the policy rate as the main instrument, keep FX intervention as a backstop, and allow the franc to shoulder part of the adjustment that might otherwise require more aggressive domestic policy shifts.