The Swiss National Bank’s two top policymakers underscored on Wednesday their commitment to rein in a strong Swiss franc that has risen to levels against the euro last seen in June when Britain voted for Brexit. SNB Vice Chairman Fritz Zurbruegg said, currency market interventions had become an increasingly important tool since the financial crisis and the euro zone debt crisis had pushed up the safe-haven franc. “Since last January, our monetary policy framework is based on two elements. The first is negative interest rates, and the second element, which is important to underscore, is a willingness to intervene on foreign exchange markets as necessary,” Zurbruegg told a UBS banking conference in London.
“We have one mandate, which is to ensure price stability, and we have proved in the past that we will do what is necessary to fulfill that.” Back home, SNB Chairman Thomas Jordan gave the Swiss government the same message at their annual meeting to discuss the state of the export-led economy and monetary policy. “The economic situation in Switzerland’s most important foreign trade partners has improved somewhat, but remains subject to considerable uncertainties,” a government summary of the meeting with Jordan said. “In particular, he pointed out that monetary policy with negative interest rates was geared to the current situation with a still markedly overvalued Swiss franc and that the National Bank is still active on the foreign exchange market if needed.” The discussion also covered the impact of low interest rates on pension funds, how mortgage and real estate markets were faring, and regulation of financial institutions, it said.
After the comments, the franc eased against the euro, which was trading at around 1.0750 francs by around 1000 GMT. In London, Zurbruegg highlighted the pressure on Swiss pension funds that were not built for negative rates, but reiterated the SNB expected economic conditions to improve. “If we look at inflation, initial forecasts show us moving out of negative territory in 2017 and a gradual regaining of growth,” he said. “However we do see that the pressure (on companies) remains strong.” The SNB charges banks 0.75 percent for excess deposits and aims to keep three-month money market rates at that level too.