Jordan Sees No Need for SNB Policy Shift Despite Lower Franc
(Bloomberg) -- The Swiss National Bank is “not in a hurry” to adjust policy despite the franc touching a milestone low as the situation remains delicate, President Thomas Jordan said.
“There’s no need to do anything regarding monetary policy at this moment,” he said in an interview with Bloomberg Television on Thursday in Washington. Jordan spoke just hours after the franc broke through the 1.20-per-euro mark for the first time since early 2015, when the central bank gave up the ceiling it had set at that level.
He said that although the franc’s drop goes in the “right direction” the currency is still considered a haven and the situation “fragile” and prone to change from one day to another. “So we remain very prudent.”
The SNB is using a two-pillar policy of negative interest rates and a pledge to intervene in currency markets, if necessary, to keep the franc in check. Its deposit rate is set at minus 0.75 percent to maintain the spread with the neighboring euro area.
“We are convinced that the current monetary policy is still necessary,” he said. With inflation still low, the central bank will continue with its policy “as it is today.”
The franc was little changed at 1.19953 per euro at 9:10 a.m. in Zurich on Friday, having traded as weak as 1.20055 earlier in the day.
At the European Central Bank, policy makers still have to start debating the future path of asset purchases, which are currently scheduled to end in September. There’s also the matter of sub-zero interest rates. Once they start to rise, that’ll probably open the door for SNB action.
Although he declined to comment on ECB policy, Jordan said major central banks around the world going back to “normal” is a positive sign and would “help smaller economies and give them more room to maneuver in the future.”
Bloomberg’s foreign-exchange surveys back up the Swiss central bank president’s cautious stance: the median estimate for euro-franc shows a level of 1.18 per euro at the end of 2018.
“Simply the fact that they’re at 1.20 shouldn’t be enough, even though the level is of course psychologically interesting,” said Credit Suisse economist Claude Maurer. “Since the next action of the ECB isn’t that far off, the SNB will wait until then to raise rates. Unless of course the franc slid a lot more.”
A monthly poll of economists -- conducted before the 1.20 milestone was reached -- shows they anticipate the SNB will keep its deposit rate at the current level for the first nine months of 2019, before raising it by 25 basis points in the final quarter. That would be the first increase since 2007.
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