Too Much of a Good Thing: Lowflation in Switzerland

The Swiss National Bank enjoys an excellent reputation for keeping inflation in check better than other central banks. Today, in a time of low inflation and negative interest rates, this reputation has become a problem. It unduly restricts monetary policy and prevents urgently needed monetary stimulus. A revision of the strategy is needed now. We recommend that the SNB should commit to a more precise and slightly higher inflation goal and it should clarify the role of the exchange rate in its strategy.