Central bank urged to act on Swiss franc

The Swiss National Bank is expected to further trim interest rates. www.snb.ch

The Swiss Business Federation has called on the Swiss National Bank to take into account the strong Swiss franc in formulating its monetary policy.

The Federation, which is the voice of the Swiss business community, said in a report published on Monday that the strong franc was undermining the competitive position of Swiss companies in the export markets.

The National Bank is due to announce its monetary policy framework on Friday, with many economic analysts forecasting an interest rate cut of half a percentage point.

The central bank last cut its key interest rate by half a point on September 24 to counter the franc’s rapid increase against the euro, which is the currency of Switzerland’s most important trading partner.

Fluctuating rate

The Federation said that for many companies, the exchange rate of the Swiss franc against the euro in particular was at a “problematic level”, fluctuating at rates of SFr1.46-1.48.

The franc rose to a high of 1.431 against the euro on September 21 after the terror attacks in the United States on September 11 but the European single currency has since recovered ground.

In other remarks, the Federation said it expected the Swiss economy to grow by between 1 and 1.5 percent next year, with an inflation rate of 1 per cent.

It said it expected private consumption to be the main pillar supporting growth in 2002.

Economic clouds

The Federation added that although the general economic climate was cloudy, there was no cause for big economic policy changes.

Commenting on the economic situation, the Federation said Swiss exports were suffering from the markedly weaker global economic background.

However, it singled out the chemical and watch making industries as exceptions to the rule, as both continued to post “respectable growth rates”.

The Organisation for Economic Cooperation and Development said last month it expected economic growth of 1.1 per cent in Switzerland in 2002, with an inflation rate of 1.3 per cent.

swissinfo with agencies