Why a strong currency creates a problem for Switzerland

US President Donald Trump’s trade policy shook global capital in recent weeks, investors tried to look for security pockets in financial markets.

One of the beneficiaries of market volatility has been Swiss francDuring the macroeconomic or geopolitical uncertainty, it is widely seen as a safe shelter asset. Swiss currency evaluated 9.5% compared to the US dollar since the beginning of the year – in the borders of Switzerland, the demand for the Franca increases difficulties for politicians.

The Swiss franc was sold by 0.2% to 0.2% last time, purchased $ 1 around the Swiss franc in $ 0.82.

A strong Frank puts deflation pressure into Switzerland. Currency, imports – importing a significant role in the country’s economy – trying to be cheaper.

For some countries, this effect can give an answer with a pleasure of glue inflation. But as many developed markets, for example USA and EnglandThey are still trying to reduce inflation to 2% targets, Switzerland faces the opposite problem: prices fall.

Swiss inflation was negative in May, the country’s consumer price index decreased by 0.1% during the year. The price of imported goods decreased by 2.4% on the annual basis after the previous month.

Charlotte de Montpellier, French and Switzerland economist, the currency rally is noted that the country has played in the form of inflation in inflation.

“The latest landing is mainly managed by external factors,” he said on Tuesday. “A strong Swiss franc has significantly reduced the value of imported goods … This is 23% of the CPI basket of imports, which has a significant effect on general inflation in Switzerland.”

May data has noted its first return for deflation since the Swiss Covid-19 pandemia. The Swiss National Bank could previously be used to the use of two basic policies applied to eliminate the “continuous headache” for the central bank.

SNB has completed part of the seven-year negative interest rates in 2022 – a policy that is not popular with protective and lender because they eliminated their returns to savings deposits Squeeze the margin of banks and profitability.

At the last meeting in March, the Central Bank reduced 25 main points to 0.25%.

After this week’s inflation information, SNB’s “expected” to fight weapons assessment at the disposal of Swiss Franc. “

Ing, SNB’s main interest rate expects to reduce 25 main points in the last meeting of this month – and De Montpellier, De Montpellier, defended the more decreased decline.

“According to current information, the return of negative interest rates by the end of the year seems to be more visible,” he said. “Our base work brings the second 25bp cut, policy rate to -0.25% in September.

Ing, when Switzerland’s politicians are waiting to suspend the cut-off of 40.25%, De Montpellier said that Switzerland stronger strengthens his hand (SNB’s), “he said.

Lily Fang, a financial professor on the CNBC, is a financial professor, the current situation is likely to be able to reduce Switzerland to negative rates – SNB chair said that Martin Schlegel has an action Stays in the stress schedule.

“Switzerland’s government is clearly concerned, because … This is a small, open economy that trusts in international trade, and especially the United States is the most important trading partner outside the EU block,” said Fang phone conversation.

“Switzerland has already progressed and lowered the EU. I think it is most likely to be zero and even negative.”

Thursday, US Treasury Department Added Nine economy for the “Monitoring List” of trade partners “pays attention to currency experience and macroeconomic policies.”

They are: China, Japan, Korea, Taiwan, Singapore, Vietnam, Germany, Ireland and Switzerland.

In 2020, U.S. Treasury, under the leadership of the first Trump, A currency manipulator in Switzerland labeledTo accuse the Swiss Franc against Greenback deliberately devalued. The department stopped for a short time using the term “currency manipulator” on Thursday.

But Trump’s Full list of so-called reciprocal tariffs “Currency manipulation and trade barriers,” he said, the United States is planned to calculate the monetary accounts accepted by individual countries. Management, said that Switzerland Last year he canceled all industrial tariffs – 61% of tariffs are charged with the United States, and therefore, new tariffs for Switzerland will have new tariffs.

A statement on Friday said that the Swiss National Bank noted the US Treasury report.

“SNB does not participate in any manipulation of Swiss franc,” he said. “The trade balance does not want to prevent adjustments or to gain unfair competitive advantages for the Swiss economy.”

They added that the main tool used by SND to implement SNB’s monetary policy is its main interest rate – but if it is careful, it was noted that foreign exchange markets were noted.

“The use of interference in the foreign exchange market may need certain conditions to ensure the relevant monetary conditions in Switzerland,” Sorry spokesman. “When they do, SNB does not take the exchange rate target, but focuses on legal powers to ensure price stability.”

Along with the Swiss authorities, SNB, the Central Bank remained in contact with US officials and US officials to explain the economic situation and monetary policy.

We welcome the “ongoing discussions as part of the macroeconomic dialogue.

Ing’s de Montpellier, the “risky” that provokes the US administration’s potential FX intervention from SNB, the United States will interfere in the markets in the coming months, it was possible.

The founder of the former FX Trader and Private Financial Platform, the founder Alex King, SNB was “sitting well with US leadership” by SNB.

“When Switzerland labeled a currency manipulator in 2020, the threat of tariffs was not so great factor, but now there is a dilemma in his hand,” he said. “If it had to intervene again in the FX markets, it could be hit with higher US tariffs, and the adverse effect of this may be worse than short-term inflation pressures.”

“I’m not sure that they will not immediately have a foreign exchange rate, because the labeling countries’ manipers’ I Edvul ‘In Fang.” I think it will be tagged as a manipulator, (therefore) I think it will probably use it as a last resort tool. “