The SNB has the mandate to conduct monetary policy in such a way that money preserves its value and the Swiss economy develops in an appropriate manner. Find out about the SNB’s monetary policy strategy, instruments and decisions here.
Monetary policy strategy and implementation of monetary policy
The SNB is tasked with ensuring price stability, while taking due account of economic developments. The SNB’s monetary policy strategy consists of three elements: a definition of price stability, a medium-term inflation forecast and the SNB policy rate.
The Swiss National Bank implements its monetary policy by setting the SNB policy rate. In so doing, it seeks to keep the short-term Swiss franc money market rates close to the SNB policy rate. Both the regular and the other monetary policy instruments are described in the 'Guidelines of the Swiss National Bank on monetary policy instruments'.
Important monetary policy data
Questions and answers on the SNB’s monetary policy
In accordance with the Federal Constitution and the National Bank Act (NBA), the SNB has the mandate to conduct its monetary policy in such a way that money preserves its value and the Swiss economy can develop in an appropriate manner. The Constitution (art. 99) obliges the SNB, as an independent central bank, to conduct a monetary policy that serves the interests of the country as a whole. In addition, art. 5 NBA specifies that the SNB is to ensure price stability while taking due account of the development of the economy.
The SNB maintains price stability by ensuring appropriate monetary conditions. This means keeping interest rates and the exchange rate aligned to the prevailing economic situation. Low interest rates promote the supply of money and credit to the economy, thereby increasing demand for goods and services, as well as investment. Over time, however, production capacity may become stretched, leading to a rise in the price level. Equally, there is the risk of imbalances on the financial and real estate markets. Conversely, rising interest rates lead to a shortage in the supply of money and credit, thereby holding back aggregate demand. This leads in turn to a fall in capacity utilisation and causes downward pressure on prices. Given Switzerland's strong integration in the global economy, the exchange rate influences both the price level via import prices, and the utilisation of production capacity via exports.
As a rule, the SNB conducts a monetary policy assessment every quarter (in the middle of March, June, September and December) and decides on the monetary policy course. If circumstances so require, such decisions can also be made at other times. The SNB informs the public of its monetary policy decisions and the reasoning behind them. For its monetary policy decisions, the SNB analyses and assesses the economic and monetary situation (in particular the inflation outlook) in Switzerland. The monetary policy assessment is also based on the information gathered and evaluated by the SNB during its company talks. Special attention is paid to economic developments abroad because they play an important role for a country like Switzerland with its strong international integration. Based on this comprehensive analysis, the SNB draws up an inflation forecast and decides whether its monetary policy is to remain unchanged, or be tightened or eased. As a rule, monetary policy decisions are taken with regard to interest rates. But this is not always the case. If necessary, the SNB can also take non-interest rate related decisions - examples include the introduction of the minimum exchange rate on 6 September 2011 and its discontinuation on 15 January 2015, and the establishment of the SNB COVID-19 refinancing facility (CRF) in March 2020. The SNB implements its decisions through its monetary policy instruments.
The SNB defines price stability as a rise in the Swiss consumer price index (CPI) of less than 2% per annum. This is the first element of the monetary policy strategy. The CPI is calculated by the Swiss Federal Statistical Office (SFSO). Further information is available on the CPI website of the SFSO. Price stability refers to the overall average of price changes. Prices of individual goods and services can easily fluctuate more strongly. Deflation - in other words, a sustained decrease in the overall price level - is also regarded as a breach of price stability.