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SNB CHF Blog: A beleaguered central bank in the dangerous world of global macro and euro crisis

SNB CHF Blog: An economic encyclopedia on the Swiss safe-haven and its central bank written by an association of independent financial advisers.

Swiss Inflation: CPI +0.4% m/m, 0% y/y, Swiss HICP: -0.1% y/y
Other HICPs Y/Y: Eurozone 1.1 0.9%, 0.7%, 0.5%   France: 1.0 0.8% 0.7%,  Italy: 1.2 0.8 0.7%, 0.5% 0.4%, Spain: 0.5 0.3%, 0.2%, 0.0%, -0.2%, Germany:1.4% 1.3% 1.2%1.0% (sources inflation.eu,  Eurostat and investing.com)


Our Core Thesis: European leaders have successfully implemented austerity, disallowed notorious wage increases in the periphery and nearly introduced deflation. Inflation differences between the euro zone and Switzerland will decrease to zero, Swiss inflation might even be higher in some years. The CHF real eff. FX rate overvaluation talk disregards completely the continuous immigration into Switzerland. Therefore EUR/CHF will remain close to 1.20. Risk-off flows will not leave Switzerland, but they will be converted into risk-on flows (stocks and real estate) thanks to high immigration and higher Swiss GDP growth. In some years strong global growth and high German wage increases will boost inflation in Germany and Switzerland but Southern Europe will still struggle. At that moment the SNB will need to hike interest rates - before or in line with the ECB and the EUR/CHF will fall under 1.20. The consequence for monetary policy will be:
  1. Either the SNB fights inflation and the Swiss real estate bubble, allows a CHF appreciation and sells reserves below the price of EUR/CHF 1.20 or
  2. Switzerland accepts higher inflation and consequently gives up its competitive advantage in lower inflation and lower borrowing rates. The latter scenario was excluded by the SNB's Thomas Jordan already in 1999 when he pledged against a euro membership. The SNB mandate explicitly disallows inflation.
The first scenario, namely that the SNB sells reserves below EUR/CHF 1.20 is therefore the only feasible solution. Whether the SNB suffers a big loss depends on the income it can generate in the meantime. In regular posts we show how the Swiss CPI comes closer and closer to euro zone inflation. One day, maybe in 10 or 20 years, the Swiss franc will depreciate more strongly, but this will be only after the bust of the Swiss real estate bubble.


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UBS Swiss Bubble Index Q4 2013

Update 2014: Swiss home price to income ratio small in historic and global comparison

Based on four different data sources, we prove  that Swiss the home price to income ratio is small in global comparison and in a historic perspective. Combined with another decade of near zero interest rates, reason enough to think that the Swiss real estate boom should continue for another decade.

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Swiss consumer price index

Swiss Yearly Inflation Rate Overtakes First Eurozone Countries

  According to Swiss Statistics the yearly inflation rate is at 0.0%, and the monthly rate is +0.4%. The Spanish CPI is already under zero at -0.2%, and the Italian one is close to zero at +0.3%. Still in February 2012, the difference between the Swiss and Euro zone CPI was 3.7%. Prices of goods …

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Putin vs. Obama

Russia, Europe, and the new international order

By Josef Janning – 09 Apr 14 Via the European Council of Foreign Relations. The premise of an international order defined by the West and shared by the rest has been shown to be faulty. Ever since the Soviet Union fell apart and nationalism re-emerged as a divisive as well as cohesive factor in Eastern …

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Swiss gold

Official Eurostat Trade Balance Massively Distorted by UK Sales Of 1464 Tonnes of Gold To Switzerland

Somebody who follows regularly the trade balance figures from Eurostat, may have noticed a sentence that was repeated in each monthly release from the Eurostat trade statistics in 2013: “The EU28 trade surplus increased significantly with Switzerland”. The reason was massive gold sales from the UK to Switzerland.

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SNB intervention

Is the SNB Intervening Again?

Update March 21, 2014: Total SNB sight deposits increased to 367.8 bln. CHF, but flows reverted a bit. Foreign banks and “non-banks” reduced their CHF exposure to 50.8 bln, possibly converting a part of the difference into USD. Dollars are more useful when sanctions will hurt both Russian and German firms. On the other side, …

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The IMF Assessment for Switzerland and our Critique

In the 2014 assessment for Switzerland by the International Monetary Fund several sentences caught our eyes; we will contrast them with our recent critique. The most important one was that for the IMF is only “moderately overvalued”, this would have no negative effect for exporters.

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Swiss GDP Forecast march 2014 SECO

SECO expects 2.2% Swiss growth, further CHF strength ahead, understand why

The Swiss government see Swiss GDP growth at 2.2% in 2014 and 2.7% in 2015. Our estimate sees a divergence in the GDP components; we expects a lower trade surplus and higher spending. in both cases CHF should rise.

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Nato Expansion endangers Russia

Krimkonflikt: Über die Gleichschaltung der deutschen Medien

Der Propagandakrieg in Russland, in den USA und insbesondere in Deutschland und auch in der Schweiz geht weiter. Russische Medien trichtern den Menschen ein, dass eine riesige Flüchtlingswelle von Russen aus der Ukraine stattfindet. Deutsche Medien sind gleichgeschaltet: von links (TAZ, Spiegel, Stern) bis rechts (FAZ, n-tv.de und Welt) trichtern sie den Deutschen ein, dass …

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Results Estimate SNB 2013

2013 SNB’s Valuation Gains 14 billion CHF on Stocks, but Losses of 35 bln. on Gold, FX and Bonds

The Swiss National Bank (SNB) is reporting a loss of CHF 9.1 billion for the year 2013 (2012: profit of CHF 6.0 billion). Valuation losses on gold holdings amounting to some CHF 15.2 billion contrast with a profit of CHF 3.1 billion on foreign currency positions and a net result of CHF 3.4 billion from …

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Swiss gold

15 Billion SNB Losses on Gold in 2013, But 40 Billion SNB Profit on Gold between 2000 and 2012

This morning the Swiss National Bank (SNB) has published its preliminary annual results: According to provisional calculations, the Swiss National Bank (SNB) will report a loss in the order of CHF 9 billion for the 2013 financial year. Valuation losses on gold holdings amounting to some CHF 15 billion contrast with a gain of around …

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Swiss GDP Investment Annualized

GDP: Switzerland Enters Boom and.. incredibly.. SNB is Still Printing Money

According to the latest data from the SECO,Swiss GDP rose by 0.2% in Q4/2013. Despite the relatively weak headline, the detailed data showed a couple of characteristics that speak for an upcoming boom. At the same time, the Swiss National Bank is printing money again: both the monetary base and money supply are increasing. Once …

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George Dorgan

George Dorgan bei den Jungfreisinnigen Zürich, Teil 1: CHF und Schweizer Wirtschaft

Am 7. Februar hat George Dorgan eine Präsentation bei den Jungfreisinnigen Zürich gehalten. Themen waren die weitere Entwicklung des Frankens, die Schweizer Wirtschaft, die SNB und die Auswirkungen der Gold- und Masseneinwanderungsinitiativen.

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Ukraine Linguistic and Presidential Candidates

Ukraine: About Street-Elected Overthrowers and Democratically Elected Dictators

It only needs a few years until democratically elected presidents become so-called “tyrants” and “dictators”. The bad economic situation in many emerging markets and Russia, and therefore also in Ukraine, has taken its toll. Demonstrators and Ukrainian nationalists toppled a president that has a Russian mother tongue. But Yanukovych was a protector of the country’s …

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