Swiss Current Account Surplus Not Due to Mercantilism, SNB Says

Updated on
  • U.S. Treasury currency watch list has featured Swiss since ’16
  • SNB uses neg. rates, interventions to stem pressure on franc


Photographer: Philipp Schmidli

The Swiss National Bank is not keeping the franc artificially low to give exporters an edge, President Thomas Jordan said, an indirect rebuff of the U.S. which has reprimanded Switzerland for its foreign exchange market interventions.

Since 2016 export-oriented Switzerland has featured on the list of countries the U.S. Treasury has identified for their high current account surpluses and for stepping into currency markets. The SNB has used interventions for the better part of a decade to stem the strength of the franc, which is beloved among investors as a haven in times of market stress.

“Our monetary policy, with the negative interest rate and our willingness to intervene in the foreign exchange market as necessary, is not designed to give Switzerland an unfair advantage in international trade -- to support an expansion of the current account surplus in any mercantilist sense,” Jordan said in Basel on Thursday.

He said the SNB’s actions are a “necessary response to excessive upward pressure on the Swiss franc due to its perceived safe-haven status and is intended to ensure price stability.”

“After all, the Swiss franc remains highly valued -- even if, at first glance, the current account seems to suggest otherwise.”

If the surplus were the result of the franc being too weak, there would be a “stable correlation” between movements in the exchange rate and the current account surplus, he said. Yet data showed “that is not the case.”

Instead, the fact that quite a few large, multinational companies are listed in Switzerland, that the country’s inflation rate is typically lower than elsewhere and that the population is aging and therefore has a higher propensity to save are reasons for the high surplus, he said. He highlighted that commodity traders and pharmaceutical companies, which aren’t particularly exchange-rate sensitive, play a big role for the surplus but are less important to the economy as a whole.

The U.S. Treasury publishes its list twice a year, most recently in October. It has suggested the Swiss central bank cut interest rates further in a bid to reduce pressure on the currency instead of intervening in markets. The SNB’s deposit rate is already at minus 0.75 percent, the lowest of any major central bank.

“We are maintaining a constructive dialog on this matter with the responsible government agencies in the U.S.,” Jordan said.

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