Take no chances on a repeat performance by the Swiss

Fool me once, shame on you. Fool me twice, shame on me. That saying resonates strongly with observers of the Swiss National Bank.

The scars have not yet fully healed after the central bank lobbed a stink bomb into the global currency markets almost two years ago. Days after insisting that its policy for limiting the strength of the franc remained in place and would be defended with the “utmost determination”, the SNB abruptly reversed course, sparking a rally in the franc that puts the scale of October’s sterling flash crash to shame.

The franc’s runaway rally that day is still cited in seminars, textbooks and nostalgia-filled liquid lunch sessions as the premier example of how important things can go very wrong, very quickly. Fun times.

So it’s little surprise that utterances from the SNB now are scrutinised very carefully indeed. Possibly too carefully. Last week, at its quarterly rate-setting decision, the central bank diverged little from its usual language, stressing it remained willing to keep up its policy of buying foreign currencies on an ad hoc basis without defending an explicit hard upper limit for the franc.

But it has also raised eyebrows by noting that balance sheet expansion comes with risks as well as benefits. Might it, just maybe, start focusing more on the risk of losses? Ulrich Leuchtmann at Commerzbank suspects so, arguing that “as the cost, that is, the impairment of its future ability to conduct monetary policy, rises with every franc that is added to reserves . . . it will become increasingly likely that the SNB will end the interventions at some stage”.

If upward pressure on the franc persists — pretty likely if the European Central Bank keeps the taps on — then the risks of a sudden pop higher are “elevated”, he reckons. Some profit hunters are “increasingly being pointed towards the possibility of speculative attacks on the SNB”, he says. Over-thinking it? Possibly. And as Mr Leuchtmann points out, the SNB has cut 2017 and 2018 inflation forecasts — hardly a good environment to consider breaking the habit of a lifetime. But do you want to be the only person who completely ignores the risk, however tiny, of another sudden rally? That’ll be a no.

katie.martin@ft.com