SNB's Schlegel Sees 'Limited' Impact of US Tariffs

Bloomberg

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00:00The US slapped Switzerland with the highest tariff among developed nations.

00:04But still today you decided to leave monetary policy unchanged, leave interest rates unchanged at 0%.

00:10Does that mean that the situation in Switzerland is actually not as bad as everybody thinks?

00:16So our decision today was to leave interest rates at 0%.

00:20If you look at inflation, it increased from minus 0.1 in May to plus 0.2 in August.

00:28Also the inflation forecast is in the range of price stability, therefore we left interest rates unchanged.

00:36So but what is the situation in Switzerland? Is the situation in Switzerland bad or is it actually pretty good?

00:42If you look at the companies that are directly affected by tariffs, by the US tariffs, for them it's very challenging.

00:50It's very difficult.

00:51But if you take a little bit of the broader picture, a lot of firms are actually not directly affected.

00:59So overall the impact of these tariffs is limited at the moment in Switzerland.

01:06Another key industry for Switzerland is obviously the pharmaceutical industry.

01:10Would your view of appropriate monetary policy conditions for Switzerland change if the US introduced tariffs on pharmaceuticals?

01:19Oh, this is a very hypothetical question. I cannot answer it.

01:23I mean, like it's the US, like the discussion is ongoing right now.

01:27Like Trump has been threatening repeatedly that they may come tomorrow.

01:31You must have thought about it.

01:32Oh, of course, we think about it. We do the analysis.

01:36But I cannot answer to the outside these hypothetical questions.

01:41You have launched quite a few measures to increase transparency at the S&B.

01:47Not least that in four weeks from today, the S&B will for the first time publish a summary of its rate discussions.

01:54Just last year, your predecessor, Thomas Jordan, said that the S&B shouldn't do that.

01:59Are you deliberately turning away from your predecessor?

02:03So the S&B is developing its communication constantly.

02:07For example, we introduced this quarterly press conferences a few years ago.

02:14And this new step to publish a summary of the discussions is just like a further development in our communication.

02:22Some analysts say that the summary you're going to publish is just going to be a longer version of your press release.

02:28Can you promise investors that it will be worth to read it?

02:32Of course. So the summary will roughly follow all the meetings, the sessions that we have at this monetary policy assessment.

02:43And also then summarize the discussions that we have in these meetings.

02:47Let's talk about the franc.

02:49So how concerned are you at the level of inflows, which the franc has seen since the beginning of the year,

02:56like appreciate against the dollar, for example, roughly 12 percent.

03:01Like how concerned are you at this appreciation and the level of inflows?

03:05So the S&B, of course, we follow the exchange rate very closely.

03:11But in the end, we look at the monetary conditions.

03:14Monetary conditions consist of the interest rate and the exchange rate together.

03:20And then we make sure that we have appropriate monetary conditions for Switzerland.

03:26On those two tools, which you mentioned, the currency interventions and the interest rate,

03:33do you have any preference on either of them or are you just not?

03:38Our primary instrument is clearly the interest rate.

03:43And an additional instrument that we use is the exchange rate.

03:48But we do not have any preference on one of those.

03:53We come together as a board and discuss how we apply our two instruments in the monetary policy setting.

04:02In terms of your communication, you stopped calling the franc overvalued or highly valued anymore.

04:09Why don't you do that anymore?

04:11So this we already did a few quarters back.

04:14We thought it is no longer adding value.

04:17If we give an assessment of the strength of the Swiss franc every quarter.

04:24Do you still think it's overvalued, though?

04:27We do not comment on this.

04:31What data shows is that the S&B is intervening a lot less on currency market compared to those earlier times.

04:38What do you tell analysts who say that your doctrine on the franc has evolved?

04:43We are ready to intervene in the FX market if necessary.

04:49And this didn't change in the last quarters and also in the last years.

04:54You saw, like, for example, in 22, we had extensive use of FX interventions when we had high inflation.

05:00So we sold a lot of FX reserves at the time.

05:02And I can assure you that we are ready to use FX interventions on both sides of the market if it's necessary.

05:11Maybe, like, taking a bit of the broader picture from the eyes of foreign investors.

05:17So, as you said in your assessment, growth in Switzerland is dropping right now.

05:23You have the tariff trouble with the U.S.

05:26On top of that, also the biggest bank of the country is weighing options to leave the country.

05:30Has Switzerland lost its edge to be a good place for doing business?

05:37Switzerland is still a good place for doing business.

05:39If you look at business conditions in Switzerland, they are still favorable.

05:44Also, the institutional setup in Switzerland is a stable one and this is attractive for business.

05:48Let's do this.

06:02Stay?

06:04Stay?

06:07Stay?

06:11Stay?

06:12Stay?

06:14Stay?

06:15Blue?

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