The SNB’s Fork in the Road: Why 2015 Demanded Intervention and 2023 Demanded Restraint

On January 15, 2015, the Swiss National Bank (SNB) detonated a bomb under the global foreign exchange market. By abandoning the minimum exchange rate of CHF 1.20 per euro, the Franc appreciated instantaneously by nearly 30% against the common currency. The move was a desperate, massive intervention—or rather, the cessation of one—designed to shield the Swiss economy from deflationary forces and the encroaching monetary easing of the European Central Bank.

Fast forward to 2023. Inflation was the primary specter haunting Europe, yet the SNB remained conspicuously absent from the aggressive FX selling operations that characterized its previous playbook. While the Franc surged again, Zurich did not panic. The central bank allowed the currency to appreciate, viewing its strength as a necessary buffer rather than a threat to existence.

The divergence between these two periods illuminates a fundamental shift in central banking logic. The criteria for intervention have not changed; the economic variables they serve have flipped entirely. The SNB of 2015 was fighting to prevent a prices collapse, whereas the SNB of 2023 weaponized its currency to fight an inflationary spike.

The 2015 Defense: Fighting Deflation with an Unlimited Peg

To understand the restraint of 2023, one must first grasp the desperation of 2015. In September 2011, the SNB introduced a minimum exchange rate peg of 1.20 Francs per Euro. At the time, the Eurozone debt crisis was driving a "flight to safety," causing capital to flood into Switzerland. An overvalued Franc makes Swiss exports prohibitively expensive and imports cheap, creating a vacuum that sucks inflation out of the economy.

The SNB’s mandate is price stability, defined as inflation below 2% but positive. In 2011 and subsequent years, the threat was deflation. The SNB pledged to buy foreign currency in "unlimited quantities" to maintain the peg.

By January 2015, the context had degraded. The ECB was poised to launch a quantitative easing program, which would have depressed the Euro further. To maintain the 1.20 peg, the SNB would have had to expand its balance sheet to unprecedented levels, effectively monetizing the Eurozone’s debt. The decision to cease intervention was not a choice of policy but an admission that the cost of defending the peg—accumulating foreign reserves that were guaranteed to lose value—outweighed the benefit.

The intervention criteria here were binary: deflationary risk required a weak Franc. When the mechanism to achieve it (the peg) became unsustainable, the bank stopped intervening.

The 2023 Paradigm: A Strong Franc as an Anti-Inflation Tool

In 2023, the problem inverted. Inflation in Switzerland peaked at 3.5% in August 2022 and remained stubbornly above the 2% target through the first half of 2023. The drivers were exogenous: the war in Ukraine spiked energy costs, and global supply chain disruptions pushed up goods prices.

In this environment, the SNB faced a different calculus. A strong Franc acts as a "shock absorber." It lowers the price of imported goods and energy in Swiss Franc terms. Unlike 2015, where a strong Franc caused deflation, in 2023, a strong Franc helped quell imported inflation.

Consequently, the criteria for FX intervention reversed. The SNB no longer needed to sell Francs to buy Euros; it could afford to stand back—or even sell foreign currency to reinforce the Franc.

The divergence highlights how neighboring central banks often struggle with synchronization. While the SNB leveraged the currency's strength, the ECB's inflation targeting lagged behind the Fed, forcing the Eurozone to rely almost exclusively on interest rate hikes. The Swiss had an extra lever: the exchange rate.

Decision Matrix: Interest Rates vs. FX Intervention

The critical distinction between the two eras lies in the available monetary policy tools and the Zero Lower Bound (ZLB).

In 2015, interest rates were already deep in negative territory (-0.75%). Traditional rate policy was exhausted. The SNB had only one viable weapon left: the FX market. Intervention was the primary transmission mechanism for monetary policy because rates could not go lower effectively.

By 2023, the SNB had normalized its policy rate. After ending negative rates in September 2022, the bank embarked on a tightening cycle, reaching 1.75% by June 2023. With interest rates functioning as a primary tool to cool domestic demand, the urgency to manipulate the currency via massive intervention evaporated.

The decision framework for central bankers here is strict:

• If Rates < 0: FX intervention is the primary tool (2015).
• If Rates > 0: Interest rates become the primary tool (2023).

The SNB moved from a regime where they had to intervene to achieve a monetary stance, to one where interest rate policy sufficed. They could accept a stronger currency because it aided their rate hikes, rather than fighting them.

The Balance Sheet Constraint: The Cost of Intervention

A less discussed but vital factor is the balance sheet risk. The SNB is unique because it is a publicly traded company with shareholders, though its mandate remains primary. Its equity is sensitive to market fluctuations.

In 2022, the SNB reported a loss of 132 billion Swiss francs, largely due to the falling value of its foreign stock and bond holdings as markets reacted to rate hikes. Had the SNB intervened aggressively in 2023 to weaken the Franc (buying Euros and selling Francs), they would have been doubling down on assets that were losing value in a high-inflation, high-rate environment.

In 2015, the fear was balance sheet expansion. In 2023, the fear was balance sheet insolvency via asset depreciation. The decision not to intervene was also a risk management decision to avoid further accumulation of depreciating foreign assets.

This fiscal prudence aligns with broader regulatory shifts seen in other central banks, though mechanisms differ. For example, when analysts examine how the ECB calculates the deposit facility rate spread, they see a focus on corridor systems. The SNB’s focus, conversely, shifts to the valuation effects of its currency positions.

Structural Shifts in the Eurozone

The relationship between the Swiss Franc and the Euro has also structurally changed. In 2015, the Eurozone was fragile, fearing a breakup of the monetary union. The risk premium was high, and capital flows were erratic.

By 2023, the Eurozone had stabilized, albeit with sluggish growth. The existential threats had diminished. The Franc was no longer the only safe haven; the flows were less panic-driven and more yield-driven.

The SNB’s decision to float the currency in 2015 forced the market to price in risk. In 2023, the market was already pricing in the Euro's weakness and the Franc's strength. The SNB did not need to intervene to correct a market failure or a panic; the market was doing the work for them.

Conclusion: Verdict on Future Intervention

The comparison yields a clear framework for assessing future SNB actions. The bank will intervene aggressively only when domestic inflation is below target and interest rates are at their effective lower bound. Conversely, when inflation is above target, as it was in 2023, the SNB will treat a strong currency as a policy ally, not a threat.

The recommendation for market analysts is straightforward: stop looking for the SNB to defend a specific exchange rate level. The 1.20 peg is history. The new "peg" is the inflation target. If inflation trends toward 0% while rates are low, intervention returns. If inflation trends above 2%, the SNB will happily let the Franc appreciate, regardless of the damage to the export sector.

Looking ahead, as we move through the latter half of 2026, the SNB’s criteria remain contingent on imported price pressures. The divergence from other central banks, such as the pivot points used to predict a Bank of England rate shift, confirms that there is no unified playbook. The SNB plays a solitary game where the exchange rate is the variable, and price stability is the only constant.

The 2015 intervention was a defense of the economy against a deflationary monster. The 2023 non-intervention was a calculated acceptance of currency strength to burn off the inflationary fever. The mandate remained the same; the circumstances demanded opposite actions.

Sources

To dig deeper and verify the data, see:

• cnbc.com
• en.wikipedia.org