Jordan Pledges SNB Intervention to Counter ‘Overvalued’ Franc

The Swiss National Bank stands ready to intervene in currency markets to combat the “significantly overvalued” franc, President Thomas Jordan said.

“Due to the safe-haven status of the Swiss franc, the SNB has been active on the foreign exchange market,” he said according to the text of a speech for delivery in Geneva on Tuesday. “We are also willing to intervene, as required, as part of our current monetary policy.”

Pressure on the franc could rise in coming weeks if the European Central Bank boosts stimulus for the euro area. The SNB already cut its deposit rate to a record low of minus 0.75 percent in January, in tandem with abolishing its cap on the franc. The deposit rate isn’t yet at the “absolute” bottom, Jordan said two months ago.

Should the ECB act, 63 percent of economists in a Bloomberg survey predict the SNB will respond with market interventions to stop the currency from appreciating. Forty-two percent forecast another cut to the deposit rate, according to the survey conducted in October.

Given the strong franc, the SNB predicts a fall in consumer prices of 1.2 percent this year and 0.5 percent in 2016.

“The Swiss economy and its inflation outlook have been subject to strong downside pressures, due to massive exchange-rate appreciation, weak international demand, and volatile financial markets,” Jordan said in the Geneva speech text. “The Swiss franc remains significantly overvalued.”

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