Governing Board
Members of the Governing Board from 1907 onward
· Andréa M. Maechler,
Member of the Governing Board, Zurich
Goals and responsibilities of the SNB
(overview)
Mandate
The Swiss National Bank (SNB)
conducts the country’s monetary policy as an independent central bank. It is
obliged by Constitution and statute to act in accordance with the interests of
the country as a whole. Its primary goal is to ensure price stability, while
taking due account of economic developments. In so doing, it creates an
appropriate environment for economic growth.
Price stability
Price stability is an important
condition for growth and prosperity. Inflation and deflation, by contrast,
impair economic activity. They hinder the role of prices in allocating labour
and capital to their most efficient use, and result in a redistribution of
income and wealth. The SNB equates price stability with a rise in consumer
prices of less than 2% per annum. Deflation – i.e. a sustained decrease in the
price level – also breaches the objective of price stability. A medium-term
inflation forecast serves as the main indicator for monetary policy decisions.
Implementation of monetary policy
The SNB implements its monetary
policy by steering the interest rate level on the money market. The three-month
Swiss franc Libor serves as its reference interest rate. The SNB can influence
money market rates by means of its open market operations or adjust the
interest rate on sight deposits held by banks and other financial market
participants at the SNB. In order to influence monetary policy conditions, the
SNB also intervenes in the foreign exchange market, as necessary.
Cash supply and distribution
The SNB is entrusted with the
note-issuing privilege. It supplies the Swiss economy with banknotes
commensurate with demand for payment purposes. These banknotes meet high
standards with respect to quality and security. It is also charged by the
Confederation with the task of coin distribution.
Cashless payment transactions
Regarding cashless payment
transactions, the SNB is involved in the Swiss Interbank Clearing (SIC) payment
system. The payments are settled in SIC via sight deposit accounts held with
the SNB.
Asset management
The SNB manages the currency
reserves, the most important component of its assets. It requires currency
reserves to ensure that it has room for manoeuvre in its monetary policy at all
times. The level of the currency reserves is largely dictated by the implementation
of monetary policy.
Financial system stability
The SNB contributes to the
stability of the financial system. It fulfils this mandate by analysing sources
of risk to the financial system and identifying areas where action is needed.
In addition, it helps to create and implement a regulatory framework for the
financial sector, and oversees systemically important financial market
infrastructures.
International monetary cooperation
The SNB participates in
international monetary cooperation. To this end, it works in conjunction with
the federal authorities. It participates in multilateral institutions,
cooperates with the Confederation in providing international monetary
assistance, and works on a bilateral level with other central banks and authorities.
Banker to the Confederation
The SNB acts as banker to the
Confederation. It processes payments on behalf of the Confederation, issues
money market debt register claims and bonds, handles the custody of securities
and carries out foreign exchange transactions.
Statistics
The SNB compiles statistical data
on banks and financial markets, the balance of payments, direct investment, the
international investment position and the Swiss financial accounts.
Monetary policy by year
The SNB
conducts an in-depth monetary policy assessment in March, June, September and
December. Each of these assessments results in a monetary policy decision and
the publication of a medium-term conditional inflation forecast. The SNB sets
out the reasons for its decisions in a press
release and in a
quarterly monetary policy report published in the Quarterly Bulletin.
In June
and December, the SNB also holds a news conference to explain its monetary
policy. The speech by the Chairman of the Governing Board provides a commentary
on monetary policy and is available on this page. The speeches of the other
Governing Board members at the news conference are to be found under Information
for/Media/Speeches.
Monetary policy strategy
The SNB’s monetary policy strategy sets out how the SNB
implements its monetary policy mandate. It has been in place since 2000, and it
consists of three elements: a definition of price stability, a medium-term
inflation forecast, and – at the operational level – a target range for a
reference interest rate, which is the three-month Swiss franc Libor (London
Interbank Offered Rate).
Definition
of price stability
The SNB
equates price stability with a rise in the national consumer price index (CPI)
of less than 2% per annum. The objective of price stability is also breached by
deflation – i.e., a protracted decline in the price level. In this definition,
the SNB takes account of the fact that inflation cannot be managed with
pinpoint accuracy; neither can it be measured accurately. Measurement issues
arise, for instance, when the quality of goods and services improves over time.
The CPI calculation methods do not fully adjust for changes of this kind; as a
result, measured inflation tends to overstate actual inflation to a small
degree.
Inflation
forecast
The SNB
reviews its monetary policy stance on a regular basis to ensure that it is
appropriate for maintaining price stability. It publishes its conditional
forecast for inflation over the next three years on a quarterly basis. The
period of three years corresponds roughly to the time required for changes in
monetary policy to be transmitted to the economy. Forecasts over such a long
horizon naturally involve considerable uncertainties. Nevertheless, by
publishing a medium-term forecast, the SNB emphasises the need to adopt a
forward-looking stance and to react at an early stage to any inflationary or
deflationary threats.
Whereas
the conditional inflation forecast serves as a main indicator for the monetary
policy decision, it also plays an important role in communicating
policy to the public.
The forecast is based on a scenario for future global economic developments and
on the assumption that the policy rate published along with the forecast will
remain constant over the entire three-year forecast period (which is why it is
conditional). The forecast thus projects how prices would develop given the
SNB’s current scenario for global economic developments and with monetary
policy in Switzerland remaining unchanged. For this reason, this forecast is
not directly comparable with other forecasts which incorporate expectations
that monetary policy will change over time.
The SNB
uses a number of economic and statistical models to make conditional inflation
forecasts. In addition to employing model-based inflation forecasts, it also
takes into consideration several indicators of domestic and international
economic and monetary developments as well as of financial stability in its
monetary policy decisions. These indicators include movements in interest rates
and exchange rates as well as growth in credit and monetary aggregates.
Particular weight is also attached to information obtained from the discussions
which the SNB’s delegates for regional economic relations conduct with
companies on their business outlook.
The SNB
does not respond in a mechanical fashion to its conditional inflation forecast.
For instance, if inflation exceeds the 2% ceiling as a result of one-off
factors such as a sudden surge in oil prices or strong exchange rate
fluctuations, the stance of monetary policy would not necessarily need to be
adjusted. The same applies to short-lived deflationary pressure.
Libor
target range
The SNB
implements its monetary policy by setting a target range for the three-month
Swiss franc Libor. The Libor is a reference interest rate in the interbank
market for unsecured loans. It is a trimmed mean of the rates charged by 11
leading banks and is published daily by the ICE Benchmark Administration. The
SNB regularly publishes its target range, which generally extends over 1
percentage point. As a rule, it aims to keep the Libor in the middle of the
target range.
The SNB
holds quarterly monetary policy assessments at which it reviews its monetary
policy stance. If required by circumstances, it can also adjust the three-month
Libor target range in between the regularly scheduled assessment dates.
Against
the backdrop of international reform efforts on benchmark interest rates for
financial contracts, the UK’s Financial Conduct Authority announced in July
2017 that it would no longer compel banks to contribute to the Libor panel
after 2021. The continued availability of the Libor is thus uncertain. The SNB
will provide advance information on any adjustments that may be necessary for
its monetary policy strategy. The changes will have no impact on its monetary
policy objectives.
(Source: https://www.snb.ch)
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