Deputy-chairman of the Swiss National Bank Fritz Zurbruegg, who has held the job since 2012, announced last weekend the bank are ready to step in with easing in order to keep the franc in check.
Beijing, China, July 16, 2016 — “There is a strong possibility we could drop interest rates shortly or step in with other interventions,” he commented to the Swiss-German regional daily paper Basler Zeitung. He added, “As far as an actual exchange rate target is concerned, we have none.”
Early in 2016 the SNB removed an upper limit restriction on the franc against the euro and have since attempted to reign in the currency using qualitative easing techniques with negative interest rates.
Many specialists believe current data shows the Swiss franc is punching well above its weight.
Michael Lane, Global Co-Head of the Investment Management Division at Shizuoka Capital Wealth Management said the currency is “extremely overvalued”.
He added in a phone interview, “The central bank in Switzerland has not been shy regarding intervention into the currency exchange. Meddling in the forex has been their recent policy and, combined with interest rate adjustment, they are keeping the franc high versus its peers.”
Major financial investors and institutions keeping their funds at the SNB are being charged -0.70 interest rates currently.
Deputy-chairman Zurbruegg failed to elaborate on what the possible long-term fallout might be in using negative rates citing lack of experience with the tool.
“We could conceivably go even further with the rates,” he said. “Obviously we take into account the immediate effects, like cash demand and declines in savings and deposits.”
Zurbruegg also weighed on with his thoughts on the imminent Brexit vote coming up in the U.K.
He remarked that the SNB have been drawing up multiple scenarios in relation to monetary policy to try and determine the best course of action for the franc should the British public choose to leave the European Union on June 23rd.
Shizuoka Capital Wealth Management