We do not like Purchasing Power or Real Effective Exchange Rate (REER) as measurement for currencies. For us, the trade balance decides if a currency is overvalued. Only the trade balance can express productivity gains, while the REER assumes constant productivity in comparison to trade partners.
Who has read Michael Pettis, knows that a rising trade surplus may also be caused by a higher savings rate while the trade partners decided to spend more. This is partially true. Recently Europeans started to increase their savings rate, while Americans reduced it. This has led to a rising trade and current surplus for the Europeans. But also to a massive Swiss trade surplus with the United States, that lifted Switzerland on the U.S. currency manipulation watch list.
To

The Producer Price Index (PPI) or officially named “Producer and Import Price Index” describes the changes in prices for producers and importers. For us it is interesting because it is used in the formula for the Real Effective Exchange Rate. When producers and importers profit on lower price changes when compared to other countries, then the Swiss Franc reduces its overvaluation. The Swiss PPI values of -6% in 2015 (see below), compared to -3% in Europe or -1% in the U.S., diminished the overvaluation. In 2017, however, producer prices are rising again – in both Europe and Switzerland. See more in Is the Swiss Franc overvalued?
15.10.2019 – The Producer and Import Price Index fell in September 2019 by 0.3% compared with the previous month, reaching 101.1 points

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We do not like Purchasing Power or Real Effective Exchange Rate (REER) as measurement for currencies. For us, the trade balance decides if a currency is overvalued. Only the trade balance can express productivity gains, while the REER assumes constant productivity in comparison to trade partners.
Who has read Michael Pettis, knows that a rising trade surplus may also be caused by a higher savings rate while the trade partners decided to spend more. This is partially true. Recently Europeans started to increase their savings rate, while Americans reduced it. This has led to a rising trade and current surplus for the Europeans. But also to a massive Swiss trade surplus with the United States, that lifted Switzerland on the U.S. currency manipulation watch list.
To

The Producer Price Index (PPI) or officially named “Producer and Import Price Index” describes the changes in prices for producers and importers. For us it is interesting because it is used in the formula for the Real Effective Exchange Rate. When producers and importers profit on lower price changes when compared to other countries, then the Swiss Franc reduces its overvaluation. The Swiss PPI values of -6% in 2015 (see below), compared to -3% in Europe or -1% in the U.S., diminished the overvaluation. In 2017, however, producer prices are rising again – in both Europe and Switzerland. See more in Is the Swiss Franc overvalued?

12.09.2019 – The Producer and Import Price Index fell in August 2019 by 0.2% compared with the previous month, reaching 101.4 points

We do not like Purchasing Power or Real Effective Exchange Rate (REER) as measurement for currencies. For us, the trade balance decides if a currency is overvalued. Only the trade balance can express productivity gains, while the REER assumes constant productivity in comparison to trade partners.
Who has read Michael Pettis, knows that a rising trade surplus may also be caused by a higher savings rate while the trade partners decided to spend more. This is partially true. Recently Europeans started to increase their savings rate, while Americans reduced it. This has led to a rising trade and current surplus for the Europeans. But also to a massive Swiss trade surplus with the United States, that lifted Switzerland on the U.S. currency manipulation watch list.
To

The Producer Price Index (PPI) or officially named “Producer and Import Price Index” describes the changes in prices for producers and importers. For us it is interesting because it is used in the formula for the Real Effective Exchange Rate. When producers and importers profit on lower price changes when compared to other countries, then the Swiss Franc reduces its overvaluation. The Swiss PPI values of -6% in 2015 (see below), compared to -3% in Europe or -1% in the U.S., diminished the overvaluation. In 2017, however, producer prices are rising again – in both Europe and Switzerland. See more in Is the Swiss Franc overvalued?
15.08.2019 – The Producer and Import Price Index fell by 0.1% in July 2019 compared with the previous month, reaching 101.6 points

The increasing volatility of SNB Earnings
Annual results are not really definite. Given that the SNB accumulates foreign currencies with interventions, they have huge swings.
But the SNB may lose 50 billion in one year and win 60 billion in the next year or vice verse.
Good years of the Credit Cycle
This trend was stopped in 2016, even without the need for a cap on the franc. But one should consider that we are in the good years of the credit cycle now. Bad quarters like the one in Q4/2018 are rare now.

Franc will rise again with crisis or inflation
With a new financial crisis or a with a big rise of inflation, the run into the Swiss franc will start again.
And this at an exchange rate that is not digestible for

We do not like Purchasing Power or Real Effective Exchange Rate (REER) as measurement for currencies. For us, the trade balance decides if a currency is overvalued. Only the trade balance can express productivity gains, while the REER assumes constant productivity in comparison to trade partners.
Who has read Michael Pettis, knows that a rising trade surplus may also be caused by a higher savings rate while the trade partners decided to spend more. This is partially true. Recently Europeans started to increase their savings rate, while Americans reduced it. This has led to a rising trade and current surplus for the Europeans. But also to a massive Swiss trade surplus with the United States, that lifted Switzerland on

Current Account

Key figures:
Current Account: Up 2.35% against Q1/2018 to 17.2 bn. CHF
of which Goods Trade Balance:  Minust 0.62% against Q1/2018 to 15.9 bn.
of which the Services Balance: Plus 21.1% to 6.8 bn.
of which Investment Income: Plus 5.8% to 3.5 bn. CHF.
 

Current Account Switzerland Q1 2019(see more posts on Switzerland Balance of Payments, Switzerland Capital Account, Switzerland Current Account, Switzerland Financial Account, ) Source: snb.ch – Click to enlarge

Financial account
The following is from the official press release and gives more details on the other parts of the financial account.

Net acquisition of financial assets
The assets side of the financial account registered a total

The Producer Price Index (PPI) or officially named “Producer and Import Price Index” describes the changes in prices for producers and importers. For us it is interesting because it is used in the formula for the Real Effective Exchange Rate. When producers and importers profit on lower price changes when compared to other countries, then the Swiss Franc reduces its overvaluation. The Swiss PPI values of -6% in 2015 (see below), compared to -3% in Europe or -1% in the U.S., diminished the overvaluation. In 2017, however, producer prices are rising again – in both Europe and Switzerland. See more in Is the Swiss Franc overvalued?
13.06.2019 – The Producer and Import Price Index remained unchanged in May 2019 compared

The Producer Price Index (PPI) or officially named “Producer and Import Price Index” describes the changes in prices for producers and importers. For us it is interesting because it is used in the formula for the Real Effective Exchange Rate. When producers and importers profit on lower price changes when compared to other countries, then the Swiss Franc reduces its overvaluation. The Swiss PPI values of -6% in 2015 (see below), compared to -3% in Europe or -1% in the U.S., diminished the overvaluation. In 2017, however, producer prices are rising again – in both Europe and Switzerland. See more in Is the Swiss Franc overvalued?
14.05.2019 – The Producer and Import Price Index remained unchanged in April 2019

The increasing volatility of SNB Earnings
Annual results are not really definite. Given that the SNB accumulates foreign currencies with interventions, they have huge swings.
But the SNB may lose 50 billion in one year and win 60 billion in the next year or vice verse.
Good years of the Credit Cycle
This trend was stopped in 2016, even without the need for a cap on the franc. But one should consider that we are in the good years of the credit cycle now. Bad quarters like the one in Q4/2018 are rare now.

Franc will rise again with crisis or inflation
With a new financial crisis or a with a big rise of inflation, the run into the Swiss franc will start again.
And this at an exchange rate that is not digestible for

We do not like Purchasing Power or Real Effective Exchange Rate (REER) as measurement for currencies. For us, the trade balance decides if a currency is overvalued. Only the trade balance can express productivity gains, while the REER assumes constant productivity in comparison to trade partners.
Who has read Michael Pettis, knows that a rising trade surplus may also be caused by a higher savings rate while the trade partners decided to spend more. This is partially true. Recently Europeans started to increase their savings rate, while Americans reduced it. This has led to a rising trade and current surplus for the Europeans. But also to a massive Swiss trade surplus with the United States, that lifted Switzerland on

The Producer Price Index (PPI) or officially named “Producer and Import Price Index” describes the changes in prices for producers and importers. For us it is interesting because it is used in the formula for the Real Effective Exchange Rate. When producers and importers profit on lower price changes when compared to other countries, then the Swiss Franc reduces its overvaluation. The Swiss PPI values of -6% in 2015 (see below), compared to -3% in Europe or -1% in the U.S., diminished the overvaluation. In 2017, however, producer prices are rising again – in both Europe and Switzerland. See more in Is the Swiss Franc overvalued?
15.04.2019 – The Producer and Import Price Index increased in March 2019 by 0.3% compared

Key developments in 2018
The current account surplus for 2018 was CHF 71 billion, CHF 26 billion more than in the previous year. Changes in primary income (labour and investment income) had the greatest impact: Whereas one year earlier an expenses surplus of CHF 9 billion was recorded, owing to exceptionally large expenses for direct investment receipts in 2017, in the year under review there was a receipts surplus amounting to CHF 3 billion. The receipts surplus in goods trade increased by CHF 7 billion to CHF 57 billion. This was attributable mainly to higher receipts from merchanting. The receipts surplus from trade in services rose by CHF 2 billion to CHF 20 billion. Secondary income (current transfers)

We do not like Purchasing Power or Real Effective Exchange Rate (REER) as measurement for currencies. For us, the trade balance decides if a currency is overvalued. Only the trade balance can express productivity gains, while the REER assumes constant productivity in comparison to trade partners.
Who has read Michael Pettis, knows that a rising trade surplus may also be caused by a higher savings rate while the trade partners decided to spend more. This is partially true. Recently Europeans started to increase their savings rate, while Americans reduced it. This has led to a rising trade and current surplus for the Europeans. But also to a massive Swiss trade surplus with the United States, that lifted Switzerland on

The Producer Price Index (PPI) or officially named “Producer and Import Price Index” describes the changes in prices for producers and importers. For us it is interesting because it is used in the formula for the Real Effective Exchange Rate. When producers and importers profit on lower price changes when compared to other countries, then the Swiss Franc reduces its overvaluation. The Swiss PPI values of -6% in 2015 (see below), compared to -3% in Europe or -1% in the U.S., diminished the overvaluation. In 2017, however, producer prices are rising again – in both Europe and Switzerland. See more in Is the Swiss Franc overvalued?
14.03.2019 – The Producer and Import Price Index increased in February 2019 by 0.2%

Overview
The SNB earned 2 billion on negative interest rates, but lost nearly 17 billion CHF on FX investments, of which 5 bn on bonds and 12 bn on stocks.

The increasing volatility of SNB Earnings
Annual results are not really definite. Given that the SNB accumulates foreign currencies with interventions, the results have huge swings that depends on the FX rate.
But the SNB may lose 50 billion in one year and win 60 billion in the next year or vice verse.
Franc will rise again with crisis or inflation
With a new financial crisis or a with a big rise of inflation, the run into the Swiss franc will start again.
And this at an exchange rate that is not digestible for the SNB.
We considered that after an inflationary

We do not like Purchasing Power or Real Effective Exchange Rate (REER) as measurement for currencies. For us, the trade balance decides if a currency is overvalued. Only the trade balance can express productivity gains, while the REER assumes constant productivity in comparison to trade partners.
Who has read Michael Pettis, knows that a rising trade surplus may also be caused by a higher savings rate while the trade partners decided to spend more. This is partially true. Recently Europeans started to increase their savings rate, while Americans reduced it. This has led to a rising trade and current surplus for the Europeans. But also to a massive Swiss trade surplus with the United States, that lifted Switzerland on

The Producer Price Index (PPI) or officially named “Producer and Import Price Index” describes the changes in prices for producers and importers. For us it is interesting because it is used in the formula for the Real Effective Exchange Rate. When producers and importers profit on lower price changes when compared to other countries, then the Swiss Franc reduces its overvaluation. The Swiss PPI values of -6% in 2015 (see below), compared to -3% in Europe or -1% in the U.S., diminished the overvaluation. In 2017, however, producer prices are rising again – in both Europe and Switzerland. See more in Is the Swiss Franc overvalued?
14.02.2019 – The Producer and Import Price Index fell in January 2019 by 0.7% compared

The Producer Price Index (PPI) or officially named “Producer and Import Price Index” describes the changes in prices for producers and importers. For us it is interesting because it is used in the formula for the Real Effective Exchange Rate. When producers and importers profit on lower price changes when compared to other countries, then the Swiss Franc reduces its overvaluation. The Swiss PPI values of -6% in 2015 (see below), compared to -3% in Europe or -1% in the U.S., diminished the overvaluation. In 2017, however, producer prices are rising again – in both Europe and Switzerland. See more in Is the Swiss Franc overvalued?
18.01.2019 – The Producer and Import Price Index fell in December 2018 by 0.6% compared

The increasing volatility of SNB Earnings
Annual results are not really definite. Given that the SNB accumulates foreign currencies with interventions, they have huge swings.
But the SNB may lose 50 billion in one year and win 60 billion in the next year or vice verse.
Good years of the Credit Cycle: Rising Bond and Stock Prices until 2017
Until 2017, the SNB was able to profit on a secular tendency where both stock and bond prices (until 2016) were rising. This led to rising profits, that compensated for the ever rising Swiss franc.
One new negative effect of huge balance sheet
In an interview with Swiss Eco television program, SNB vice president Fritz Zurbruegg stated that the SNB is able to intervene thanks to

Current Account

Key figures:
Current Account: Down 35.7% against Q3/2017 to 14.6 bn. CHF
of which Goods Trade Balance: Down 23.9% against Q3/2017 to 10.5 bn.
of which the Services Balance: Plus 8.7% to 5.0 bn.
of which Investment Income: Minus 39.7% to 7.6 bn. CHF.

Current Account Switzerland Q3 2018(see more posts on Switzerland Balance of Payments, Switzerland Capital Account, Switzerland Current Account, Switzerland Financial Account, ) Source: snb.ch – Click to enlarge

Financial account
Net acquisition of financial assets
The assets side of the financial account registered a net reduction of CHF 34 billion (Q3 2017: net reduction of CHF 37 billion). This reduction was mainly due to other investment,

We do not like Purchasing Power or Real Effective Exchange Rate (REER) as measurement for currencies. For us, the trade balance decides if a currency is overvalued. Only the trade balance can express productivity gains, while the REER assumes constant productivity in comparison to trade partners.
Who has read Michael Pettis, knows that a rising trade surplus may also be caused by a higher savings rate while the trade partners decided to spend more. This is partially true. Recently Europeans started to increase their savings rate, while Americans reduced it. This has led to a rising trade and current surplus for the Europeans. But also to a massive Swiss trade surplus with the United States, that lifted Switzerland on

Swiss National Bank leaves expansionary monetary policy unchanged
The Swiss National Bank (SNB) is maintaining its expansio nary mo netary policy, thereby stabilising price developments and supporting economic activity. Interest on sight deposits at the SNB remains at –0.75% and the target range for the three-month Libor is unchanged at between –1.25% and –0.25%. The SNB will remain active in the foreign exchange market as necessary, while taking the overall currency situation into consideration.
Since the monetary policy assessment of September 2018, the Swiss franc has depreciatedslightly on a trade-weighted basis. This development is primarily due to the strengthening of the US dollar. The franc is virtually

The Producer Price Index (PPI) or officially named “Producer and Import Price Index” describes the changes in prices for producers and importers. For us it is interesting because it is used in the formula for the Real Effective Exchange Rate. When producers and importers profit on lower price changes when compared to other countries, then the Swiss Franc reduces its overvaluation. The Swiss PPI values of -6% in 2015 (see below), compared to -3% in Europe or -1% in the U.S., diminished the overvaluation. In 2017, however, producer prices are rising again – in both Europe and Switzerland. See more in Is the Swiss Franc overvalued?

The Producer and Import Price Index fell in November 2018 by 0.3% compared with the

We do not like Purchasing Power or Real Effective Exchange Rate (REER) as measurement for currencies. For us, the trade balance decides if a currency is overvalued. Only the trade balance can express productivity gains, while the REER assumes constant productivity in comparison to trade partners.
Who has read Michael Pettis, knows that a rising trade surplus may also be caused by a higher savings rate while the trade partners decided to spend more. This is partially true. Recently Europeans started to increase their savings rate, while Americans reduced it. This has led to a rising trade and current surplus for the Europeans. But also to a massive Swiss trade surplus with the United States, that lifted Switzerland on

The Producer Price Index (PPI) or officially named “Producer and Import Price Index” describes the changes in prices for producers and importers. For us it is interesting because it is used in the formula for the Real Effective Exchange Rate. When producers and importers profit on lower price changes when compared to other countries, then the Swiss Franc reduces its overvaluation. The Swiss PPI values of -6% in 2015 (see below), compared to -3% in Europe or -1% in the U.S., diminished the overvaluation. In 2017, however, producer prices are rising again – in both Europe and Switzerland. See more in Is the Swiss Franc overvalued?
13.11.2018 – The Producer and Import Price Index increased in October 2018 by 0.2%

The increasing volatility of SNB Earnings
Annual results are not really definite. Given that the SNB accumulates foreign currencies with interventions, they have huge swings.
But the SNB may lose 50 billion in one year and win 60 billion in the next year or vice verse.
Good years of the Credit Cycle
This trend was stopped in 2016, even without the need for a cap on the franc. But one should consider that we are in the good years of the credit cycle now.
Franc will rise again with crisis or inflation
With a new financial crisis or a with a big rise of inflation, the run into the Swiss franc will start again.
And this at an exchange rate that is not digestible for the SNB.
We considered that after an inflationary