Swiss National Bank President Thomas Jordan said he has no intention to change or scrap a franc ceiling of 1.20 versus the euro.
“We will maintain our current policy for as long as necessary,” Jordan said on July 20 in Moscow, where he attended a meeting of Group of 20 finance chiefs. “This monetary policy stance is needed to act within our mandate.”
The SNB imposed the cap on the franc in September 2011, citing the need to ward off deflation and a recession. It has amassed foreign currency reserves equal to about three-quarters of Switzerland’s annual economic output as a result of its efforts to defend the limit.
Jordan’s comment, in line with what he said at the SNB’s June policy review, rebuts the view held by some analysts, who said the SNB could use the franc’s weakening against the euro to shift the cap in the franc. Even with the cap at 1.20 per euro Swiss consumer prices, which as of June had fallen for 21 months running.
The franc has depreciated 2.4 percent against the euro this year as the fiscal crisis in the 17-nation currency union loses severity. It was little changed at 1.2370 against the euro at 2:07 p.m. in Zurich. Against the dollar it was at 93.98 centimes.
Abolishing the ceiling is still a ways off, Jordan said on June 20. The SNB expects consumer prices to fall 0.3 percent this year. After the policy review last month, Jordan also reiterated that the central bank wouldn’t exclude any instrument to help maintain adequate monetary conditions.
The International Monetary Fund earlier this year gave the SNB the green light to charge banks on their excess deposits, should the franc be subject to another round of appreciation pressure.
Chief financial officers at Swiss companies expect the franc to decline to 1.25 per euro within the next 12 months, according to a quarterly survey of 120 CFOs conducted by Deloitte LLP at the end of the second quarter and published yesterday.
“The SNB’s consistent and successful defense of the exchange floor has boosted CFOs’ confidence that the Swiss franc will not return to its previous strength in the near future,” Deloitte said.