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(Bloomberg) -- The Swiss National Bank is set to maintain its expansionary monetary policy for the foreseeable future even after the franc’s recent depreciation against the euro, President Thomas Jordan said in an interview with Finanz und Wirtschaft.
“It doesn’t make any sense to jeopardize the recovery by tightening our monetary policy,” Jordan said, while acknowledging that the recent weakening against the euro reduced the franc’s “significant overvaluation.” The situation in foreign exchange “remains fragile,” he said. “We don’t know if the short-term movements we see in the markets are sustainable.”
The franc has been the focus of the Swiss central bank’s monetary policy for more than half a decade, and it is pursuing a two-pillar policy of negative interest rates and the pledge to intervene in markets if needed to stop the currency from appreciating. Yet the franc’s depreciation to a 2 1/2 year low against the euro in August and global moves toward policy normalization at major central banks may prompt an eventual change in Switzerland too.
Still, Jordan -- speaking to FUW before attending the Kansas Federal Reserve symposium in Jackson Hole last week -- said that normalization is still some way off.
“When prices and the economy and the international environment and the interest rate differential to foreign assets develop in a way that a reduction of the level of monetary expansion suggests itself, the SNB will act,” he said. “Currently that isn’t the case and it doesn’t look like this will be the case in the foreseeable future.”
The SNB announces its next monetary policy decision on Sept. 14. Economists in a Bloomberg survey last month don’t expect the central bank to change its deposit rate of minus 0.75 percent until the second quarter of 2019.
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