Jordan Says Entire SNB Governing Board Backed Franc Cap Exit
(Bloomberg) — The Swiss National Bank’s decision to give up its cap on the franc, which roiled financial markets, was supported by all governing board-members, President Thomas Jordan said.
“Naturally after an intense discussion,” he said in an interview with Le Temps today. “Such a decision must necessarily be shared by all the directors”
The interview comes a day after the SNB sent shock waves through currency and equity markets by announcing it was abandoning its three-year-old cap of 1.20 per euro on the franc and instead increasing the charge on deposits still further. Among investors, reactions ranged from “idiotic” to “brave.”
Jordan told the newspaper that while the SNB was aware the decision could have a big effect on financial markets, signaling the move ahead of time “would’ve opened the door to speculators.”
As for the negative interest rate on sight deposits, which the SNB introduced in December, deepening the cut this week, Jordan said they will work.
“You don’t see the effect from one day to the next, but with time,” he said.
The Swiss economy is in a better state than in 2011, when the franc nearly hit parity with the euro amid the region’s sovereign debt crisis, Jordan said.
At its December monetary policy review, the SNB forecast consumer prices falling 0.1 percent this year, with economic growth of about 2 percent.
Still, following the decision to quit the cap, “the situation of the economy is more difficult,” he said. “The franc is clearly overvalued against the dollar and the euro.”
To contact the reporter on this story: Catherine Bosley in Zurich at cbosley1@bloomberg.net To contact the editors responsible for this story: Fergal O’Brien at fobrien@bloomberg.net Zoe Schneeweiss, Jim Silver
