SNB Isn’t Weighing a New Cap to Fight Franc’s Latest Surge
SNB Can Cut Rates But Isn’t Weighing New Franc Cap, Jordan Says
(Bloomberg) --
The Swiss National Bank left the door open to a further easing of policy to rein in the “highly valued” franc, though a new currency cap isn’t in the cards for now.
“Not at this moment,” SNB President Thomas Jordan told Bloomberg TV’s Francine Lacqua in response to a question about a new minimum exchange rate for the Swiss franc. “At the moment we have the system that we have. We believe this is the right one.”
Scrutiny of the SNB has increased this year, with the franc strengthening to a three-year high versus the euro and the U.S. warning Switzerland over its interventions in the currency market.
The Swiss central bank sells francs against other currencies occasionally to try to limit its gains, part of an ultra-loose policy that also includes a -0.75% deposit rate.
“We still have the room to cut rates, if necessary, but of course we know there are also side effects,” and officials always conduct a cost-benefit analysis, he said.
The Swiss franc touched a session low against the euro after Jordan’s comments and stood at 1.0737 at 10:38 am in Zurich. It also weakened against the dollar.
The U.S. Treasury put Switzerland back on its currency watch list this month after data suggested the SNB stepped up interventions in the latter half of last year. The central bank generally doesn’t comment on its market activities though it does publish an annual tally.
“We do not manipulate the currency but we have to intervene to steer monetary conditions in Switzerland,” Jordan said. “We never intend to weaken the Swiss franc to get an advantage over other countries but rather we have to avoid that the Swiss franc becomes too strong -- so that we have a deflationary environment.”
--With assistance from Jan Dahinten and Richard Jones.
To contact the reporter on this story: Catherine Bosley in Zurich at cbosley1@bloomberg.net
To contact the editors responsible for this story: Fergal O'Brien at fobrien@bloomberg.net, Jan Dahinten
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