ZURICH (Reuters) – Foreign currency interventions remain an important tool for the Swiss National Bank, Vice Chairman Fritz Zurbruegg said, despite a welcome weakening in the value of the Swiss franc this year.
The improved global economic outlook had reduced demand for safe haven assets such as the franc, Zurbruegg told Swiss newspaper Corriere del Ticino.
Increased confidence in the eurozone, which has been boosted by pandemic stimulus plans, had also helped reign in the Swiss franc against the euro, Zurbruegg said.
“We believe the franc is still high,” he told the paper in an interview to be published on Tuesday, signaling the SNB would not be changing from its ultra expansive monetary policy.
“If we look at inflation, it is still very low and GDP is not yet at the pre-crisis levels,” Zurbruegg said. “That is why we are convinced that our expansionary monetary policy remains appropriate.”
The SNB is due to give its next policy update on June 17. Its policy for the last six years has been based on foreign currency interventions and charging commercial banks an interest rate of minus 0.75%.
The idea that the SNB was trying to weaken the franc to protect Switzerland’s export industry was “completely false,” Zurbruegg said.
“We have to bear in mind that in a small and open country like ours, the exchange rate has a major impact on both inflation and economic growth,” he said.
“For this reason, it is important to maintain the instrument of foreign exchange interventions alongside the classic interest rate instrument.”
Although low and negative interest rates have caused strong growth in Swiss property prices, Zurbruegg said, the positives clearly outweighed the negatives.
“Without this expansionary policy, we would have a much stronger franc, lower growth and inflation and higher unemployment,” he said. “So the average Swiss citizen is better off thanks to our policy.”
(Reporting by John Revill; Editing by Peter Graff)
