‘Danish System’ of Fixed Exchange Rate Not for SNB, Jordan Says

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Fixing the franc permanently to another currency would not be compatible with the Swiss National Bank’s mandate, according to its chief.

Speaking at a conference in St. Gallen, Switzerland, SNB President Thomas Jordan said that while a minimum exchange rate, such as his institution once used, was “helpful,” a “Danish system” wouldn’t work in the longer term.

“It’s very clear that our mandate is to have an independent monetary policy” with price stability in the long run, he said. “This is only possible when we have in the long run a flexible exchange rate.”

The SNB had an upper limit of 1.20 per euro on the franc between 2011 and 2015, using interventions to defend it. It is currently using a deposit rate of minus 0.75% plus a pledge to wage currency market interventions to stem appreciation pressure on the franc, which is considered a haven currency.

Interventions could be “absolutely necessary,” Jordan said, reiterating the SNB’s official line.

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