SNB Pledges Steps to Supplement Cap ‘Immediately’ If Needed

The Swiss National Bank will defend its cap on the franc via currency interventions and is prepared to supplement it with further measures.

“The SNB will continue to enforce the minimum exchange rate with the utmost determination and is prepared to buy foreign currency in unlimited quantities,” the central bank, based in Bern and Zurich, said in a statement today. “The SNB will take further measures immediately if required.”

The comment comes in response to voters rejecting an initiative that would have required the SNB to hold at least 20 percent of its assets in gold. The central bank said it was “pleased to hear” of the referendum’s outcome.

The SNB set a cap of 1.20 per euro on the franc three years ago to shield the economy from the euro area’s debt crisis. It stepped up its rhetoric in September, saying it would take supplementary action “immediately” if necessary.

The prospect of the European Central Bank intensifying stimulus has raised pressure on the franc. Sight deposits -- cash-like holdings commercial banks keep with the SNB -- rose in the week ending Nov. 21, in a sign it may have intervened to defend its currency cap after a two-year hiatus. Policy makers had said previously the SNB hadn’t waged interventions since September 2012.

All three members of the rate-setting SNB board -- President Thomas Jordan, Vice President Jean-Pierre Danthine and board member Fritz Zurbruegg -- have said that negative rates are in the central bank’s arsenal of instruments. Danthine said on Oct. 9 that such a measure could become necessary if the situation in the 18-nation euro area deteriorated.

The SNB, whose mandate is for positive rates of inflation below 2 percent, forecasts consumer prices increasing 0.1 percent this year. It sees them rising just 0.2 percent next year and 0.5 percent in 2016. It expects the Swiss economy to grow 1.5 percent in 2014.

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