SNB Ready to Act If Franc Strength Worsens Outlook, Jordan Tells Le Matin
Switzerland’s central bank remains ready to act if the franc’s strength worsens the outlook for the economy, governing board member Thomas Jordan said.
“Since Sept. 6 we have been saying that we were ready to take further measures if the economic outlook and the risk of deflation require it,” Swiss National Bank (SNBN) Vice President Jordan told the Geneva-based Le Matin Dimanche newspaper in an interview published today. “The franc is still highly valued.”
The SNB on Sept. 6 imposed a limit of 1.20 francs versus the euro to combat the threat of deflation and help exporters after the Swiss currency gained as much as 33 percent during the preceding twelve months and reached an all-time high against the euro on Aug. 9.
Jordan didn’t say which measures the SNB would be willing to take. SNB spokesman Walter Meier confirmed the contents of the interview and said that it was conducted on Nov. 21.
Switzerland’s economy “is entering a difficult phase, with a very low and possibly even slightly negative growth rate,” the governing board member told the newspaper. In addition to the franc’s strength hampering the country’s exports, “the global economy is slowing which causes demand to decline.”
Nobel Biocare Holding AG (NOBN) this month posted an unexpected loss for the third quarter, citing costs from hedging against the franc’s strength. Cement maker Holcim Ltd. (HOLN) said Nov. 9 the franc’s appreciation reduced third-quarter sales and operating profit by 15 percent.
Growth Estimates Cut
Economists at Credit Suisse Group AG last week lowered their estimates for 2012 economic growth to 0.5 percent from 2 percent. Foreign sales will “come to a virtual standstill” next year as prospects for Switzerland’s export markets have become “decidedly gloomier,” they added.
The SNB will publish its first forecast for 2012 economic growth in its next monetary policy assessment on Dec. 15. At its last meeting in September, the central bank said the Swiss economy would expand between 1.5 percent and 2 percent this year, “only because of the favorable economic development in the first half.”
“In a very dangerous and volatile environment,” the cap of the franc “has reduced the risks to the Swiss economy and eased the deflationary pressure,” Jordan told the newspaper.
The Swiss franc, sought as a safe haven as the debt crisis engulfed the euro area, has been trading in a range of 1.2012 to 1.2474 versus the shared currency since the introduction of the cap and was at 1.2319 on Friday. Against the dollar, the franc was at 93 centimes.
“We think that the franc will weaken further with time,” Jordan said according to Le Matin Dimanche.
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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