The Swiss National Bank will continue to enforce the minimum exchange rate against the euro “with the utmost determination” chairman Thomas Jordan told shareholders on Friday in Bern.
Jordan, who was confirmed as head of the bank on April 18, said the swift measures taken by the SNB in August and September – cutting interest rates to increase liquidity, and setting a minimum exchange rate - had had the desired effect in reducing the “very substantial” overvaluation of the franc.
“In the past few months there have been growing signs that the economic situation in Switzerland has stabilised as a result of the minimum exchange rate,” he said in his statement, published on the SNB website.
He said the move had not only reduced the overvaluation, but had given business leaders “a better basis for planning”. But he added that even at SFr1.20 to the euro, Switzerland’s currency is still overvalued.
He warned that the international economy faced a “muted outlook” and described the international environment as “highly uncertain”.
Looking to the future, Jordan said 2012 was likely to be another difficult year for the Swiss economy. It can expect “moderate economic growth” of about one per cent, but accompanied by a “moderate increase in unemployment”.
He said interest rates were likely to remain low for some time, but warned that in the long term this could mean that imbalances build up. The SNB is keen to see a “capital buffer” – a temporary increase in the equity requirements for banks - that would be activated temporarily if lending grows excessively.