Zurich – Thomas Jordan, the head of the Swiss National Bank, told a Swiss newspaper that the value of the Swiss franc is not high, even though it has gone up on paper. He also said that the central bank wanted to be deliberately vague about how it sees the safe-haven currency.
“In the past, we used terms like “highly valued” or “significantly overvalued” for the Swiss franc to send a message about the need to step in. At the moment, it’s not clear that the Swiss franc is worth a lot, and we don’t want to comment on every move.” In an interview that came out Saturday in the newspaper Neue Zurcher Zeitung, he said this.
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His comments come at a time when the Swiss National Bank (SNB) is focusing on using the strength of the franc to fight inflation. For years, the SNB used currency intervention and negative interest rates to keep the franc low because they were afraid it would hurt the export-based economy.
Jordan said that he didn’t think there would be a time when other central banks would use the same strategy.
“The value of the yen is at an all-time low, the value of the pound sterling has dropped a lot, and the value of the euro is not very strong. I don’t see any signs of being competitive. The U.S. dollar and the Swiss franc, which are both strong currencies, are seen as safe havens, he said.
He said that the SNB will continue to step in if the franc rises so much that the monetary policy environment becomes too tight. “But we also don’t want to make the inflation problem worse by making the franc too weak. “We don’t want to be more clear on purpose.”
Jordan said that the SNB could use its balance sheet along with its policy rate to keep prices stable.
“We’re not going to cut our balance sheet just because it’s so big,” he said. “But if it helps us keep prices stable, we’ll do it.”
He said that reducing the SNB’s balance sheet “will likely take a long time.”
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“If we sold a lot of foreign currency all at once, it would put too much pressure on the value of the dollar. “When inflation is high, interest rates are clearly going up, and the franc is getting weaker, that is the best time to sell.”
