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The Swiss National Bank Monetary Policy

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Central Bank

The Swiss National Bank (SNB) is Switzerland’s independent central bank. The bank is responsible for issuing currency, conducting monetary policy, and providing the general public with information on its activities. The Swiss National Bank is mandated to conduct monetary policy in such a way that money preserves its value and the economy develops favorably and serves the interests of the country as a whole. Article 5 Paragraph 1 of the Constitution describes the responsibilities of the SNB as Ensuring price stability, and in doing so, take due account of economic developments. Central banks are seen as necessary institutions for providing a stable economy. In some countries, the banks loan money to the state and manage sate assets. Other banks were set up like insurance to counteract frequent runs on banking establishments. The Swiss National Bank was established at the end of the 19th century as a response to the failure of multiple private money-issuing institutions to provide an economy that corresponded to the requirements of the country as a whole.

Monetary Policy

The monetary policy strategy of the Swiss National Bank consists of three elements: a definition of price stability, a conditional inflation forecast over the subsequent three years, and a target range for the reference interest rate (three-month Swiss franc Libor (London Interbank Offered Rate)). The SNB defines price stability to be a rise in the consumer price index of about 2% per year. The Conditional Inflation Forecast is published quarterly and communicates to markets the target interest rate. The condition mainly being, that the forecast is based on the assumption that market stimuli will remain mostly constant for the forecasted period. The target range for the three-month LIBOR corresponds to the average interest rates among major international banks in London, and usually spans a 1 percentage point window. A significant determining factor in the influence of monetary policy is the allocation of the bank’s assets. The bank’s assets mostly consist of gold and foreign currency investments such as bonds in euros and US dollars. Large-scale purchases of foreign currency were needed to counter upward pressure on the Swiss franc since 2009. Because Switzerland is a relatively small country with a small economy and an internationally important financial sector, foreign currency reserves are an important confidence-building factor to help prevent and overcome crisis. Another policy change that the SNB implemented in order to counter the effects of the 2008 financial crisis was to employ a zero-interest rate policy to boost the economy. Because of economic instability in European and Russian zones, demand rose for investment in the safe swiss franc. In response to this, the SNB abandoned its dependence on the euro and shook currency markets in order to devaluate its currency and make its exports more competitive.

Two-thirds of the profits from the bank’s assets are mandated to be distributed among the twenty-six cantons (state-like provinces).

In the event of serious disruptions in the international monetary system, the SNB has the ability to loan out a credit line of CHF 10 billion. As a last resort, the SNB can provide this emergency liquidity assistance to individual banks if they are systematically important and able to put up sufficient collateral to cover the liquidity provided.


The Federal Act on Currency and Payment Instruments of 1999 made the Swiss franc (CHF) the currency unit used in Switzerland. In addition to banknotes and coins, sight deposits at the Swiss National bank are also deemed to be legal tender. Banknotes and coins are introduced into markets by two offices in Berne and Zurich, as well as fourteen other agencies on behalf of the Swiss National Bank. Swiss banknotes are printed by a private company named Orell Fussli Security Printing Ltd. and the Confederation is responsible for minting coins in the federal mint, Swissmint. Regular examination of security technologies is crucial to prevent counterfeiting. The entire world has



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