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Sept. 1 (Bloomberg) -- Swiss National Bank President Thomas Jordan said the cap on the Swiss franc remains vital as global economic risks have increased.
“At the moment, given worsening of the environment, the key remains the minimum exchange rate,” he said, speaking at a business event in Lugano, Switzerland. “Should geopolitical conflicts worsen, the impact on the economy would likely be stronger than anticipated,”
The Zurich-based central bank set a ceiling of 1.20 per euro on the franc three years ago to ward off deflation and a recession. Coupled with the conflicts in Ukraine and the Middle East, rhetoric by Mario Draghi suggesting the European Central Bank may be about to embark on quantitative easing lifted the franc to a near 21-month high last week.
“The franc remains highly valued against the euro,” Jordan said.
The SNB, whose mandate calls for rates of inflation below 2 percent, foresees consumer prices stagnating this year, with economic growth of 2 percent. It expects price growth to rise to 0.4 next year and 1 percent in 2016. The central bank will update those forecasts at its next policy review on Sept. 18.
According to Bloomberg News’s monthly survey of economists, published before ECB President Draghi made his comments in Jackson Hole, Wyoming, on Aug. 22, the SNB will maintain its cap for at least another two years.
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