Switzerland's Hildebrand Sees Economic Risks From Euro Crisis, Japan Quake
Swiss National Bank President Philipp Hildebrand said inflation currently remains “weak,” while the economy faces risks from Europe’s debt crisis and the potential impact from the earthquake in Japan.
“Despite the increase in oil prices, current inflation remains weak and inflation expectations remain stable,” Hildebrand said at an event in Geneva today. “Our economy is still facing considerable risks and in some aspects there are still very high uncertainties.”
The central bank left its benchmark interest rate unchanged near zero last week and said there is “no threat to price stability in the short term.” The decision came as the Swiss franc reached a record against the dollar, pushed up by global uncertainty in the wake of the March 11 quake in Japan. The currency, considered a haven in times of turmoil, has also gained against the euro.
“Complacency would be the wrong attitude,” Hildebrand said. While euro-area finance ministers made an “important decision” on solving the region’s debt crisis this month, the “problems in a number of countries continue to cast a shadow of uncertainty and risk.”
The Swiss franc has gained 12 percent over the last year versus the euro, the currency of its main trading partner, eroding exporters’ competitiveness. Against the dollar, it reached a record 88.52 centimes per dollar on March 17.
The franc traded at 1.2858 versus the euro as of 12:17 p.m. in Zurich, little changed from yesterday. Against the dollar, it traded at 90.34 centimes.
Middle East, Japan
Hildebrand said the turmoil in the Middle East has added to uncertainty by pushing up oil prices, though Switzerland is “somewhat protected by the strong franc.”
“The third source of risk is the situation in Japan,” he said. “It’s very difficult to make an accurate assessment as how we should quantify these risks.”
The SNB on March 17 raised its forecast for economic growth this year to about 2 percent from 1.5 percent, citing “broad based” growth in the economy.
Hildebrand said today that Swiss exports are “remarkably resilient,” adding that the stronger franc will eventually result in some “growth slowdown.”
To contact the reporter on this story: Klaus Wille in Zurich at kwille@bloomberg.net
To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net
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