A look at the SNB's monetary policies 10 years after the abolition of the franc-euro floor

The SNB discontinued the minimum exchange rate with the Euro ten years ago. Despite the initial shock, the Swiss GDP rose again quickly. Prof. Edoardo Beretta, Adjunct Professor at the Faculty of Economics at Università della Svizzera italiana (USI), commented on the SNB's monetary policies on TeleTicino.

The rapid recovery of the Swiss markets after the SNB's decision to discontinue the minimum exchange rate showed its solidity: "The Swiss export sector is very resilient," Professor Edoardo Beretta commented on TeleTicino. "It is a high value-added sector influenced by exchange rate dynamics, which can be quite unpredictable. In other words, if a good or service is perceived as significantly beneficial to an economy on an international scale, people will still purchase it even if the exchange rate is less favourable."

The franc has appreciated greatly over the past few years, but this can prove counterproductive in sectors such as tourism or exports. "Determining the sustainability of the franc's appreciation is challenging. Values close to parity are traditionally critical, as they are historically rare," explained the USI professor.

Prof. Beretta explained the possible critical issues that would be encountered if the minimum exchange rate were reintroduced: "While I don't consider this particularly likely in the short to medium term, the Swiss National Bank (SNB) could choose to establish a minimum exchange rate. However, this would be a costly operation, as it would involve the massive purchase of foreign currency to strengthen it, resulting in a depreciation of the franc. This scenario is plausible, especially since the SNB has the mandate to maintain price stability and promote favourable economic conditions. If such a strategy were to be implemented, it would be beneficial to be accompanied by fiscal policies that would help the export sector become less dependent on exchange rate fluctuations.".

The complete interview with Professor Edoardo Beretta on TeleTicino is available at the following link (from minute 8:41, Italian only).