SNB to Keep Options Open in Event of ECB Fallout, Maechler Says

  • SNB prepared to intervene in currency markets, Maechler says
  • Sees fragile global environment, exchange-rate risks

The Swiss National Bank has an eye on the actions of euro-area policy makers and will keep all options open in its bid to combat the strong franc, Governing Board member Andrea Maechler said.

“We closely watch the decisions, the discussions, the official communications of central banks, including those of the Fed and the ECB,” she said in a speech in Geneva on Thursday. “For us it’s important to keep all options open and choose the best given the circumstances.”

The European Central Bank officials are weighing whether to inject fresh stimulus next month, with an announcement in the euro area potentially coming a week before the SNB’s Dec. 10 policy review. Further ECB easing could weaken the euro against the franc, which Maechler termed “significantly overvalued.” She also repeated the central bank’s pledge to intervene in currency markets if necessary.

Although Switzerland has avoided a recession, economic momentum has slowed this year due to the strong franc. The currency appreciated sharply after the SNB allowed it to float freely against the euro again in January, removing an upper limit of 1.20 per euro that had been in force for more than three years.

To lessen investor appetite for the currency, the SNB cut its deposit rate to minus 0.75 percent. Maechler said that level was appropriate for now.

“Generally we’re of the opinion that the economy is again on the path of moderate recovery,” she also said, confirming the central bank’s 2015 growth forecast of just under 1 percent -- half the pace of last year. “But there are significant downward risks. These stem particularly from the fragile international environment and exchange rate developments.”

A slowdown in China and other emerging markets is crimping overseas demand for European exports, while commodity producers are grappling with a slump in prices.

“The conditions for global demand have worsened somewhat in recent months,” Maechler said. Still, moderate global growth in coming years should “at least partly offset the drawbacks due to the overvalued franc,” she said.

Maechler joined the SNB’s three-person governing board in July.

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