Price stability is the fundamental pillar of the Swiss National Bank (SNB). But in the Swiss context, it cannot be understood independently of the country’s structural specificities: wage inertia, the role of the Swiss franc as a safe-haven asset, high trade openness, and strong institutional credibility. These elements shape a monetary regime that is unique among advanced economies.
For more than two decades, Switzerland has maintained average inflation significantly lower than that of its counterparts. This performance is partly due to moderate wage dynamics, in the absence of automatic wage indexation to prices. According to Kitov and Kitov (2011), the elasticity of inflation to changes in unemployment is similar to that in Japan, i.e., ten times lower than in the United States. Nominal inertia helps to disable the traditional price-wage loop mechanisms. It also partially neutralizes temporary shocks to energy or imported goods prices.
Added to this is a solid anchoring of expectations. Fazio, Powell, and Williams’ (2023) analysis of central bank credibility in small open economies shows that the SNB is perceived as one of the most reliable institutions in terms of inflation control, alongside Norway and Sweden. The anchoring of medium-term forecasts reduces the amplitude of real rate adjustments and dampens imported volatility.
But the central variable in the Swiss equation remains the exchange rate. In an economy where imports account for nearly half of GDP, the national currency becomes the main channel for transmitting monetary policy decisions. An appreciation of the franc quickly leads to imported disinflation. Fink, Frei, Maag, and Zehnder (2023) have shown that a 25 basis point increase in the key interest rate causes an immediate appreciation of the franc by +0.8%, which is three to four times greater than the effect observed in the euro area. The impact on inflation, although gradual, is significant: a 1% increase in the nominal exchange rate reduces inflation by around 0.15 percentage points over four quarters.
Given this sensitivity, the SNB’s strategy is based on a three-year conditional inflation forecast, assuming that the key interest rate remains unchanged. Introduced in 2000, this framework breaks with the European Central Bank’s (ECB) rigid inflation targeting and the Federal Reserve’s (Fed) symmetric average. As Kohli (2010) pointed out, this conditional approach protects against self-fulfilling forecasting errors that can result from overly precise guidance. It also allows for a probabilistic reading of inflation, incorporating uncertainties related to the global economic situation.
Institutional communication has become more in-depth over time. Since 2015, the SNB has systematized fan charts and incorporated the concept of the « franc as an external stabilizer » into its public statements. In 2025, it took a further step forward by publishing a structured summary of its monetary policy deliberations four weeks after each decision. This development brings the SNB closer to the transparency standards of the major central banks while preserving the collegial nature of its debates.
However, the complexity of the global context makes the conduct of monetary policy more uncertain. Since 2022, geopolitical tensions and rising protectionism have led to lasting divergences in inflation trajectories between major currency areas. The OECD report (2024) on monetary fragmentation notes that the correlation between European and US inflation rates has fallen from 0.9 to 0.6 in three years. For Switzerland, this decorrelation increases the instability of the franc. When the Fed lowers its rates, flows to the franc strengthen, and the SNB must arbitrate between price stability and competitiveness.
In this context, global dynamic models are essential for understanding the interactions between external shocks and domestic inflation. Research by the Bank for International Settlements (2024) on small open economies shows that the transmission of foreign monetary policy is twice as fast in Switzerland as in the eurozone, and that inflation is three times more sensitive to imported prices. Financial openness, combined with the credibility of the SNB, reinforces this exposure.
Ultimately, price stability in Switzerland is not the result of monetary automatism. It is the result of a demanding balance between institutional anchoring, strategic adaptation, and a careful reading of the global context. In a world where shocks are more frequent, more fragmented, and less correlated, this stability relies on monetary governance that is rigorous, flexible, and open to international analytical coordination. It is this ability to combine national discipline with global lucidity that ensures Switzerland’s monetary resilience.
Download the PDF: The Swiss Monetary Policy Balance – Policy Brief
