SNB Minutes (Mar): Discussed the current monetary conditions resulting from the interest rate level and the exchange rate

Financial Markets:

• One factor is the Swiss franc's role as a safe haven, which led to appreciation pressure as a result of geopolitical tensions and the escalation in the Middle East.
• Uncertainty about the future course of oil prices remains high. Further developments on the energy markets will depend, among other things, on the duration of the war, the accessibility of the Strait of Hormuz, and damage to the energy infrastructure in the Middle East. 
• In particular, the war in the Middle East could curb economic activity more strongly and increase upward pressure on the Swiss franc.

Policy:

• Monetary policy remains expansionary, however. The impact of the easing of monetary policy in recent quarters is reflected, among other things, in robust growth in lending, which is now back at the level recorded before the last tightening cycle.
• Owing to the appreciation of the Swiss franc, monetary conditions are tighter than at the time of the monetary policy assessment in December.
• The SNB's willingness to intervene in the foreign exchange market should remain high in order to counter a rapid and excessive appreciation of the Swiss franc, which would jeopardise price stability in Switzerland.

Economy:

• It remains uncertain how strongly costs for companies will rise due, among other things, to the increase in energy prices, and to what extent companies will be able to adjust their sales prices.
• In the short term, it is likely to increase more strongly than expected in December, owing to the war in the Middle East and the resulting increase in energy prices.
• Growth could be rather subdued in the short term, before recovering again in the medium term. GDP growth of around 1% is expected for 2026 and around 1.5% for 2027.
• Inflation is likely to increase in the short term due to higher energy prices, but remain within the range consistent with price stability.