The link between monetary policy and migration is rarely discussed – but it may be stronger than we think. In this interview, economist Adriel Jost argues that years of expansionary policy by the Swiss National Bank (SNB) have indirectly fueled immigration by overstimulating the economy. Andreas I. Müller, Professor of Macroeconomics and Labor Markets at the University of Zurich, cautions against politicizing monetary policy and warns of the risks of deflation if the SNB were to tighten rates for non-monetary reasons.

This article by Albert Steck was originally published in NZZ on 4.10.2025 in German. Translated and edited for context purposes by the UBS Center.

Two topics stir emotions in Switzerland more than most. One is immigration: in the past year alone, the country saw a net inflow of over 80,000 people. The other is the extremely low interest rates, which continue to cause discontent. Savings accounts hardly yield any returns. Economist Adriel Jost hypothesizes that these two areas, immigration and interest rates, are closely linked – through the monetary policy of the Swiss National Bank (SNB). “For years, Switzerland had negative policy rates, which led to an overheated economy,” he says. Despite this excessive stimulus, inflation did not surge. Instead, low interest rates fueled immigration. The reason, he argues, lies in open labor markets. The economy was able to meet the additional demand for workers, triggered by monetary stimulus, through immigration, which also kept wage growth subdued. As a result, there was no inflationary pressure, and the SNB saw no reason to step on the brakes. “The true inflation in Switzerland is immigration,” says Jost. “And it is being reinforced by the SNB’s expansionary monetary policy.”

A paradoxical situation

The thesis, which Jost recently outlined in the magazine Schweizer Monat, has sparked heated debate among experts. Yet the connection between monetary policy and immigration has preoccupied him for quite some time, he says. He first encountered the issue about ten years ago, when he still worked at the SNB: “Even back then, economists were discussing the paradoxical situation that the economy was being supported with extraordinary monetary measures, even though the country was at full employment and suffering from a shortage of skilled labor,” explains Jost, who is now a Fellow at the Institute for Swiss Economic Policy (IWP) at the University of Lucerne and a lecturer at the University of St. Gallen. The current economic situation, he adds, supports his assessment. “A policy rate at zero, which strongly stimulates the economy, is only justified if the Swiss economy is facing a crisis,” says Jost. “But the SNB is not expecting such a downturn.” Once again, immigration is helping to keep inflation low despite the monetary floodgates being wide open.

Jost stresses that immigration also brings benefits. Yet he doubts that it is the SNB’s role to promote it through expansionary monetary policy. His proposal therefore reads: “As long as inflation remains low, the SNB should make its policy more dependent on labor market conditions.” If the economy is at full employment, as it currently is, the central bank could scale back its stimulus and move toward a higher policy rate.

The risk of a deflationary spiral

Among the skeptics of such a realignment of monetary policy is Andreas I. Müller, Professor of Macroeconomics and Labor Markets at the University of Zurich. He warns against politicizing monetary policy: “The regulation of immigration is a task for policymakers. If we start making the SNB responsible for this, it risks losing its political independence.” In any case, the policy rate influences overall employment growth at best, not whether those workers come from within the country or from abroad, Müller argues. Moreover, the SNB could face a policy dilemma: “If the National Bank raises rates because of high immigration, the Swiss franc could appreciate and push Switzerland into a dangerous deflationary spiral with negative inflation rates.”

And even then, it is not guaranteed that a tighter monetary policy would effectively slow immigration. “The main reason for immigration is Switzerland’s attractiveness to foreign workers,” Müller says. If higher interest rates were to choke economic activity, the result could be a decline in prosperity without any significant reduction in immigration. Jost, for his part, also rejects the politicization of monetary policy. He emphasizes that his intention is not for the SNB to fine-tune immigration. “But if the National Bank contributes to a constant overheating of the economy through its policy rate, this too has political consequences – it influences how wealth is distributed.”

Moreover, he says, one must distinguish between growth driven by population increase, which only expands the economy in breadth, and per capita growth. “If total output rises but wealth is divided among more people, the individual is not necessarily better off,” Jost explains. He acknowledges that an overly restrictive monetary policy can have negative effects. But an excessively expansionary course is equally risky. Negative interest rates, for example, can create real estate bubbles, and growing foreign currency reserves from interventions could expose the SNB to substantial losses.

Expansionary policy comes with risks

Andreas I. Müller counters these arguments by noting that the SNB has pursued a successful policy even in turbulent times: “That the Swiss franc is sought as a safe haven during crises, and therefore appreciates, is something the National Bank cannot control. Yet it has nonetheless managed to maintain high credibility – both in the markets and among the public.” Politics, he adds, struggles with the migration issue. All the more reason to keep this debate away from the SNB. “The primary task of the National Bank is to ensure price stability,” Müller says. “If its mandate were expanded to include employment – and particularly immigration – it could quickly lose public trust.”

Jost says he deliberately initiated this controversial debate, as the effects of ultra-loose monetary policy with zero interest rates in a country with open borders remain little researched. In the near future, Switzerland will continue to gain experience with this, since the policy rate is likely to remain at zero for some time or even slip back into negative territory. A topic, then, that will continue to stir emotions for some time to come.