To strengthen the Swiss franc and reduce imported inflation, the Swiss National Bank sold foreign currency in the first quarter.
The Swiss National Bank (SNB) sold foreign exchange worth 32.3 billion francs ($36 billion) during the first three months of the year, according to data released Friday, more than the 27.3 billion francs in the previous quarter.
It's likely to continue to stick to this course as central bank president Thomas Jordan reiterated the SNB would continue to intervene in the foreign exchange market if necessary, with foreign currency sales currently in the foreground.
Protection Against Imported Inflation
The days when the Swiss franc was considered overvalued compared to the euro and the dollar and foreign currency purchases were intended to weaken the Swiss franc to protect the export economy, are long gone. About a year ago, the trend reversed and the SNB started selling foreign currencies, buying francs in return.
By doing so, the central bank relies on the inflation-dampening effect of a strong national currency. While price increases in the euro countries climbed at times above 10 percent, Swiss inflation topped out at 3.5 percent, recently weakening in May to a 2.2 percent annual rate.
In 2021, the SNB purchased foreign currencies worth 21.1 billion Swiss francs, after buying just under 110 billion the year before.
