SNB Takes ‘Holistic’ View on Franc’s Appreciation, Schlegel Says

(Bloomberg) — The Swiss National Bank uses a whole range of indicators to judge whether the franc has strengthened too far, according to President Martin Schlegel.

Speaking in an interview with Bloomberg Television, the central bank chief said that the inputs that policymakers take into account go beyond simple outsized moves against the euro, as happened this month.

“This is something that we look at on a holistic approach,” Schlegel said. “We look at the Swiss franc, all the exchange rates basically, and also then on monetary conditions, which consists of the interest rate, interest-rate environment and the exchange rates. And based on this, we say if the monetary conditions are appropriate for Switzerland or not.”

Earlier on Thursday, the SNB held back from an interest-rate cut below zero but changed the language of its quarterly policy statement to declare that its “willingness to intervene in the foreign-exchange market has increased.” Schlegel explained to reporters that this approach would counter “a rapid and excessive appreciation” of the currency.

The SNB’s wording is notable because it differs from the description of “overvalued” or “highly valued” that officials used to apply to the franc when they felt its strength had become excessive. Schlegel last year suggested that using those labels every quarter had become unhelpful.

The approach of formally assessing monetary policy once every three months keeps the SNB to a far sparser schedule than peers such as the European Central Bank. In the interview, Schlegel said that rate moves between calendar gatherings are always an option if needed.

“The Swiss National Bank is monitoring the situation very closely all the time,” he said. “If necessary, we can come together and take a decision.”

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