SNB Reacts to Intervention Criticism, Keeps Pledge on Franc

(Bloomberg) -- The Swiss National Bank is trying to head off tougher criticism from the U.S. about its aggressive currency activity as it pledged to keep fighting the strong franc.

In a surprise statement, it said it will publish figures on the volume of interventions quarterly rather than just once a year in a bid to improve transparency. Although the policy is designed to combat deflationary risks, they’ve landed Switzerland on the U.S. Treasury’s watchlist for countries allegedly gaming their exchange rates. Among its recommendations, the U.S. suggested the Swiss publish figures more frequently.

The announcement Thursday followed the SNB’s regular policy decision, when it said the franc is “highly valued” and that it’s ready to “intervene more strongly” as needed.

“I’d say that the SNB seems to be bowing to political pressure but I’m not sure if that makes monetary policy more effective,” said Karsten Junius, chief economist at Bank J. Safra Sarasin. “One key point is that one doesn’t know when the SNB intervenes, and this lack of transparency is of course a risk for traders when they speculate.”

Being classified as a currency manipulator by the U.S. could mean speculators start to doubt the SNB’s resolve to intervene, prompting them to push the currency higher. The franc has eased since hitting a five-year high earlier in 2020, but it remains vulnerable to a number of risks, including Brexit and the U.S. presidential election.

In addition to regular interventions, Switzerland’s long-running battle involves record-low interest rates, as officials try to prevent inflows of capital that push up the franc. The SNB’s main rates were kept at -0.75% on Thursday.

The Swiss currency slipped a touch against the euro following the policy decision and was trading at 1.0779 at 11:24 a.m. in Zurich.

“Our expansionary monetary policy remains essential,” Jordan said in a call with journalists, citing the economy’s slump this year. The SNB forecasts a 5% contraction this year, as well as a sharp drop in consumer prices. According to new forecasts, the inflation recovery will be modest, with the rate averaging only 0.2% in 2022.

The decision to adjust the publication schedule came in response to heightened public interest both in Switzerland and abroad, Jordan said. While there were situations where publishing more details on activity weren’t helpful, there were also instances were the reverse is the case, he said.

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