2026-11-05 - Martin Schlegel: Transmission and conduct of monetary policy in Switzerland

To achieve its mandate, a central bank needs to understand how its actions affect the financial system and the economy. Switzerland is a small open economy with a stable political and institutional environment. This creates a special setting for monetary policy. Our main tool is the SNB policy rate. If necessary, the SNB also uses other measures. Understanding the transmission of our monetary policy to the Swiss economy is important for the SNB in achieving its mandate. Changes in the policy rate affect monetary and financial conditions. Short- and long-term rates change, and asset prices and the exchange rate move. This affects consumption and investment, as well as imports and exports. According to our estimates for Switzerland, both the 10-year interest rate and the exchange rate go up after a policy rate increase. One year after the increase, both inflation and output are lower. How have we applied our monetary policy strategy? In the years after the global financial crisis, policy rates reached very low levels, both in Switzerland and abroad. Safe-haven flows posed a threat to price stability. In such an environment, it was important to supplement interest rate policy with for

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