SNB Says It Will Cap Franc as Long as Conditions Warrant
The Swiss National Bank (SNBN)’s ceiling on the franc will stay in place as long as it is needed, according to Vice President Jean-Pierre Danthine.
“The cap isn’t there forever -- it is there as long as it corresponds to monetary conditions,” Danthine said late yesterday at a business reception in Lausanne, Switzerland.
Danthine’s comment comes after SNB President Thomas Jordan said in a newspaper interview yesterday that there was no reason to give up the ceiling on the Swiss currency. The central bank imposed the cap of 1.20 per euro on the franc in September 2011, citing the need to ward off deflation and a recession.
Danthine said that the cap’s strength against the euro in 2011 justified introducing the ceiling.
“Inflation is basically zero,” Danthine also said. Swiss consumer prices ended 21 months of declines in July.
The central bank, which has held the benchmark rate at zero since August 2011, won’t raise them this year or next, according the the median estimate of economists in Bloomberg’s most recent monthly economic survey published Aug. 9.
Swiss house and apartment prices have soared in recent years, with mortgages kept cheap by the SNB’s loose policy. The SNB has repeatedly warned of overheating, and the government is requiring banks to hold more capital as of Sept. 30 as a buffer, to guard against rising defaults.
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