As inflation in Switzerland continues to fall faster than in other European nations, the president of the Swiss National Bank (SNB) has argued that there is one thing that kept the country from the financial abyss. Thomas Jordan argued that the Swiss franc was the main reason why the inflation rate has remained low.

Switzerland saved from inflation by strong currency

Speaking at an event in Canton Schwyz on August 20, Jordan argued that the strong franc “saved Switzerland from excessive inflation” over the last few years. While annual inflation in the United States peaked at 9,1 percent in 2022, and some European countries saw inflation rise to over 10 percent, Swiss rates never rose higher than 3,5 percent.

For 2024, the State Secretariat for Economic Affairs predicts that annual inflation will total 1,4 percent by the end of 2024, and drop to 1,1 percent in 2025. The economy is also expected to grow by 1,2 percent this year and by 1,7 percent the year after. By contrast, in June 2024, the annual inflation rate in Germany and the Netherlands was set at 2,2 and 3,2 percent respectively.

Swiss franc thrives in times of crisis and market turmoil

“If you want to protect yourself against imported inflation, then the franc must appreciate,” Jordan explained. As a consequence of the bank’s policy, and the fact that the currency is seen as a “safe haven” investment in times of crisis, the franc rose to a record valuation against the euro in September 2022. It then rose to a near-10-year high again in August 2024, largely as a consequence of turmoil in global markets.

Jordan, who is set to leave the SNB in September, said that the franc’s strength also allowed the bank to raise interest rates less drastically than others, and cut them earlier. As of July this year, the average interest rate for a Swiss mortgage dropped to a two-year low.

Real wages in Switzerland fail to rise despite lower inflation

However, while prices did not rise as fast in Switzerland as they did in other nations, like the rest of Europe Swiss salaries have failed to keep up with rising prices. Indeed, a recent study from the KOF Swiss Economic Institute at ETH Zurich revealed that 2025 is set to be the first year since 2019 that workers will see their wages rise faster than inflation.

There are also concerns that the SNB’s policy of keeping the franc valuable is having a negative impact on entrepreneurs and businesses, as a strong currency means Swiss exports are more expensive for those abroad. This idea was showcased on August 21 when it was confirmed that Hero would close down its jam and confiture factory in Lenzburg by the end of 2024, with the company blaming the strong franc for the decision.