The Swiss National Bank (SNB) has indicated that it is prepared to step up interventions in foreign currency markets to counter rising upward pressure on the Swiss Franc, according to SNB Chairman Martin Schlegel.

Speaking on Tuesday at an event in Zurich, Schlegel highlighted the Franc’s enduring role as a safe-haven asset during periods of global uncertainty.

He stated that demand for the Franc has surged in recent weeks, particularly following the escalation of the conflict in the Middle East, which has intensified market volatility.

This increased demand is putting upward pressure on the currency, prompting the SNB to maintain its readiness to act to stabilise exchange rates and support Switzerland’s export-driven economy, Reuters reports.

“The main instrument is ⁠the SNB policy rate, but there are situations where ​it makes sense, in order to get the right monetary conditions, ​to be active in the foreign exchange market,” Schlegel said.

Last week, Switzerland’s central bank held its key interest rate steady at 0%, reiterating its commitment to preventing the Swiss Franc from appreciating too rapidly.

A stronger Franc can lower import prices, which in turn makes it harder for the central bank to achieve its target annual inflation rate of 0-2%.

Earlier this month, the Franc hit an 11-year high against the Euro and also strengthened versus the US Dollar.

Yet despite these currency movements, inflation in Switzerland has remained very low, registering just 0.1% in both January and February.

According to Schlegel, negative interest rates had previously helped reduce upward pressure on the Franc by making it less attractive to investors. However, he noted that this approach also came with significant downsides and unintended consequences.

“We are prepared to reintroduce negative rates, but the hurdle to bring them in is higher,” Schlegel said.

Earlier on Tuesday, SNB Governing Board member Petra Tschudin indicated that Swiss inflation is expected to rise modestly in the near term, driven in part by upward pressure on global energy prices.