Swiss Central Bank on Alert as French Elections May Bolster Franc

  • Central bank has room to intervene and cut rates if needed
  • Jordan speaks in Bloomberg TV interview in Washington
Photographer: Alessandro Della Bella/Bloomberg

The Swiss National Bank stands ready to defend the franc with interest-rate cuts and market interventions if investors pile into the haven currency in response to the French elections.

“We hope that a reasonable candidate can win -- somebody who is in favor of free markets -- but we cannot exclude that there will be more pressure on the Swiss franc,” SNB President Thomas Jordan said in an interview with Bloomberg Television in Washington, where he attended the International Monetary Fund spring meetings. “But as you know we also have our instruments to react to such a situation.”

The SNB is relying on negative interest rates and purchases of foreign currencies to prevent the franc from appreciating, with data on sight deposits suggesting that it increased the pace of its interventions in recent weeks amid heightened political uncertainty.

France has been engulfed in a tumultuous political campaign ahead of the first round of presidential elections to be held on Sunday that included at least three front-runners at different times as well as scandal, cyber war and terrorism. The risk is that two anti-free-market candidates will move on to the second round scheduled for May 7, with nationalist Marine Le Pen and Communist-backed Jean-Luc Melenchon both having spoken out against the euro and the European Union.

“We have more leverage on” interest rates, “and we of course have our willingness to intervene if necessary on the foreign-exchange market,” Jordan said. The SNB will “observe the situation very closely.”

Asked whether the European Central Bank’s careful shift toward a discussion about policy normalization would also allow the SNB to withdraw unprecedented support, Jordan said the central bank is determined to keep monetary policy expansionary.

“We are not in a hurry at all,” he said. “We plan to maintain it as long as possible to maintain appropriate monetary conditions in Switzerland.”

— With assistance by Catherine Bosley

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