Swiss central bank ignores pleas to rein in franc
THE SWISS National Bank stopped short of unveiling new measures yesterday to rein in the soaring franc, in spite of fears the strong currency could drive Switzerland’s export-dependent economy into a recession next year.
The bank ignored pleas from exporters, hoteliers and retailers to raise its cap on the currency against the euro to revive the economy. The central bank argued that deflationary risks appeared temporary and that the introduction in September of a SFr1.20 floor rate against the euro had worked.
The decision came as the SNB also kept interest rates on hold at close to zero due to the absence of inflationary pressures, and in order to deter speculative buying of the franc, a traditional haven.
Some traders had expected the SNB to nudge the floor up to SFr1.25 or even SFr1.30 to give Swiss industry a greater push amid cooling growth and rising unemployment. But the SNB stressed its primary role was to maintain price stability, not macroeconomic management, and implied it would take action again on the currency only if there was strong evidence of a sustained deflationary cycle.
The bank downgraded its growth forecast for next year to 0.5 per cent. – (Copyright The Financial Times Limited 2011)