It’s conceivable that the Swiss National Bank will discontinue purchasing foreign money. The Swiss franc can no longer depreciate significantly due to inflation.

It’s conceivable that the Swiss National Bank will discontinue purchasing foreign money. The inflation prognosis no longer permits a large depreciation of the Swiss franc, according to a research paper by Credit Suisse economist Maxime Botteron.

He believes that the SNB’s decision to suspend foreign currency purchases will assist to ease pressure on the Swiss franc.

The action would mark a momentous turning point for the nation’s central bank, which has purchased $812 billion worth of foreign currency, or more than 775 billion Swiss francs, since 2009 to keep the safe-haven currency from gaining.

According to Credit Suisse, a 10% cline in the value of the euro relative to the franc will result in a 0.5 percentage point decline in Swiss inflation.

The SNB may start selling foreign currency from its reserves in response to the franc’s devaluation on the local market during inflation, preventing an increase in consumer and import costs.

In contrast to the over 110 billion francs it purchased a year earlier, the central bank’s foreign exchange purchases in 2021 were just 21.1 billion francs. Thomas Jordan, the head of the SNB, stated earlier this month that if the franc declines too much, the bank is prepared to liquidate its foreign exchange reserves.

It is notable that on June 16, the regulator increased the discount rate for the first time since 2007 by 50 basis points to a value of -0.25 percent, which came as a surprise to the markets.