The Swiss National Bank (SNB) is prepared to intervene in the foreign currency market to help ease monetary policy during the current instability, but is “keeping its cards under the table”, its vice-chairman said in an interview on Tuesday.
The SNB’s unexpected decision on January 15 to abandon its CHF1.20 exchange rate peg against the euro has been received with shock by traders, businessmen and unions in Switzerland.
“We are in an extremely instable phase in terms of relations between currencies. We are fundamentally prepared to intervene in the foreign exchange market but are keeping our cards under the table,” Jean-Pierre Danthine told Swiss national daily Tribune de Genève in an interview.
Danthine added that the current euro-Swiss franc parity, which Swiss businessmen in particular are complaining about, is unjustified.
“We are facing a temporary overshooting which should be a surmountable obstacle for the economy, but we still need some time to find a new exchange rate balance,” he declared.
Danthine defended the SNB's decision to end its cap on the franc, saying the risks of the policy to the economy had begun to outweigh the benefits.
“SNB interventions to defend the franc had gone up in January to about CHF100 billion. That led us to believe that the euro was no longer a reference currency to which the Swiss franc could be linked in a credible long-term way,” he noted.
“The benefits of defending a currency limit reduced after it was introduced in 2011. A large section of the Swiss economy – which we recognise is not all – was able to adapt to the currency peg. And given the inflation differences between Switzerland and Europe, a euro at CHF1.20 no longer represents the same threat as in 2011.”
The vice-chairman said it was too early to gauge the impact on the economy and make forecasts. UBS bank has drastically reduced its Swiss GDP growth forecast for 2015 from 1.8% to 0.5%, predicting that the appreciating franc will cost exporters CHF5 billion.
“We are certainly moving towards more difficult conditions. The economic sectors need to realise that for three and a half years they enjoyed almost unprecedented monetary conditions from a global perspective. We believe that this is no longer possible,” he declared.
swissinfo.ch with agencies