Swiss National Bank chairman says bank's policy has been effective

Swiss National Bank Chairman Says Policy Kept Inflation on Target Despite Crises

Swiss National Bank’s Approach to Inflation and Economic Shocks

Recent Global Crises and Switzerland’s Economic Vulnerability

ZURICH, Nov 5 (Reuters) - The Swiss National Bank's monetary policy has dealt with a broad range of global crises in recent years and kept Swiss inflation broadly on target, Chairman Martin Schlegel said on Thursday.

Because Switzerland is a small, open economy with the Swiss franc being one of the world's main safe-haven currencies, the country is particularly exposed to external shocks, Schlegel told an event in Zurich.

"Because we are open, the world's storms hit us hard," Schlegel said.

Monetary Policy Tools and Inflation Targeting

Inflation Target Range and Policy Instruments

The SNB targets an inflation rate of 0%-2%, which it calls price stability, using its policy interest rate but also foreign exchange transactions to influence monetary conditions, Schlegel said.

Response to Post-Pandemic Inflation

The SNB reacted to the rise in inflation after the COVID pandemic by letting the franc appreciate to make imports cheaper, before later hiking interest rates and selling foreign currencies to boost the franc, he said.

As a result, inflation returned to the SNB's target range after rising above 3% in 2022.

Flexibility in Inflation Targeting

Aiming for a range, rather than a fixed level, allowed the central bank to tolerate fluctuations in inflation and not overreact, he said.

Recent Inflation Trends and Market Expectations

Schlegel did not comment on the recent rise in the Swiss inflation rate, which climbed to 1.5% in October, government data showed on Tuesday, the highest increase in annual prices for nearly three years, driven by higher fuel costs.

The rise has prompted growing expectations from economists that the SNB will hike rates from the current level of 0% at its next meeting in December.

Assessment of SNB’s Performance

Despite many crises, the SNB has kept inflation on target "most of the time", Schlegel said.

"The SNB has fulfilled its mandate — price stability in the medium term," he said. "This shows that our monetary policy strategy works across a broad range of circumstances."

(Reporting by John Revill;Editing by Alison Williams)