In early 2015, the Swiss economy coped up quite well with the end of the EUR/CHF minimum exchange rate. In the second quarter of this year, the Swiss economy registered an impressive growth of 0.6 percent in sequential terms, markedly above the growth levels seen in the U.S. or the euro area.

The impacts of the Swiss franc shock of 15 January 2015 are still evident in the consumer price development. Even if in recent times prices did not slow down any further, they are still a long way off the level they registered before the minimum exchange rate ended, noted Commerzbank in a research report.

The Swiss National Bank, hence, against the background of subdued inflation, is hoping that the Swiss franc would weaken over time and to this end it cut the deposit rate to a record low of -0.75 percent in January 2015. But the Swiss franc has not weakened markedly since then. The central bank therefore continues to indicate quite often that the franc continues to be overvalued.

But it has not eased its policy since early 2015, implying that it has exhausted its monetary policy scope, said Commerzbank. Additional rate cuts might only drive cash holdings and might thus have little expansionary effect. This leaves foreign exchange market intervention as the remaining effective monetary policy tool for the Swiss National Bank.

SNB President Thomas Jordan has highlighted that the central bank will stay active on the FX market if needed. The SNB, even by doing this, merely prevents the Swiss franc from strengthening but is not able to attain a sustainable depreciation, added Commerzbank. This is because of the fact that the ECB’s continued ultra-expansionary monetary policy leaves the franc under appreciation pressure against the euro.

The development of sight deposits and foreign exchange reserves implies that the Swiss National Bank continues to intervene regularly in order to prevent the Swiss franc from appreciating against the EUR. The strong uptrends in  EUR/CHF before the high risk events, such as the March ECB meeting or the June Brexit referendum, imply that the central bank likes driving the exchange rate up ahead of such events. It is probably trying to prevent the EUR/CHF levels from declining to an excessively low level in case of a flight into safe havens like the Swiss franc, according to Commerzbank.