Swiss National Bank chief warns country is more vulnerable to US trade conflict

Swiss National Bank (SNB) President Martin Schlegel has warned that the country will be hit harder than most by the escalating trade war between the US and the rest of the world.

In a speech on Friday at the Swiss National Bank’s annual shareholder meeting in the Swiss capital, Schlegel stated that the situation is uncertain for all countries involved.

However, he noted that as a small and open economy, Switzerland is especially hit hard by the effects of protectionism. He added that the environment poses a significant challenge for monetary policy.

He explicitly cited new trade actions and tariffs recently implemented by the US administration that have roiled markets worldwide. Those tensions, he said, are forcing countries to rethink trade routes and economic alliances.

The Swiss government has already withdrawn its annual economic forecast, saying there was too much uncertainty because of these tensions.

Schlegel also noted that the lasting implications of global fragmentation — the degree to which countries would follow their own national interests and retreat from cooperative global systems — are hazy.

SNB cuts interest rate as inflation falls

Last week, the Swiss National Bank lowered its main interest rate by 0.25% to combat the business risks. This decision was made to support price stability and growth.

Several economists now believe the central bank will go even bigger. Some predict the SNB could lower its policy rate to zero at its June policy review should the economic picture darken.

The strong franc is one of the biggest concerns for the SNB. With investors rushing toward safe assets amid global anxiety, the franc has been getting stronger — and that is a problem.

A stronger franc makes Swiss exports more expensive, can damage businesses, and cause lower inflation or even deflation.

Schlegel also gave public reassurance that the SNB is prepared to take action. But he emphasized that the aim is to keep monetary conditions stable — not to target any specific exchange rate.

This cautious tone reflects Switzerland’s declining inflation. The rate dipped to 0.3% in February from 0.7% in November as electricity prices fell.

Shareholders voice climate concerns

As the SNB convened for their meeting earlier today in Bern, the economy certainly took center stage. Still, shareholders made it clear that they also have a strong opinion about the SNB’s climate policy.

Climate activists protesting outside the meeting in Madrid had also gathered on Saturday. About 20 people gathered at 9:30 a.m. local time, holding up placards of Schlegel’s face and the slogan “burn, baby, burn“ to protest the SNB‘s alleged inaction on climate change.

The Climate Seniors Switzerland group’s Anne-Käthi Zweidler was among the most outspoken protesters on the board. She asked whether the SNB was truly acting in the country’s interests by investing billions in companies driving climate change.

Schlegel said the SNB’s primary concern is the maintenance of price stability. He said the bank doesn’t establish environmental targets for its investments because they aren’t requirements under its legal mandate.

He added that the SNB would work to reduce emissions from its operations to net zero but must keep its eye on the central bank’s mothership of monetary policy above all.

This response, however, didn’t cut it for the activists. A handful of protesters chanted slogans like “burn, baby, burn” outside the venue in protest of what they saw as inaction on climate change.

Shareholders and critics have expressed frustration over the SNB’s modest dividend payouts. With a target range of just 1% to 2%, the rate is considered low for a central bank, suggesting that the SNB’s balance sheet is more flexible than its peers when measured against GDP. Despite generating nearly 16 billion francs in distributable profit last year, the SNB paid out only 1.5 million francs in dividends.