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Swiss National Bank to stay able to intervene in FX markets – Zurbruegg in paper



© Reuters. FILE PHOTO: A general view of the building of the Swiss National Bank (SNB) in Zurich, Switzerland December 16, 2021. REUTERS/Arnd Wiegmann

ZURICH (Reuters) – The Swiss National Bank will keep intervening in foreign exchange markets to ensure price stability and needs to have lower interest rates than others to avoid an excessive appreciation of the Swiss franc, its vice chairman said in a newspaper interview.

“Switzerland has always had lower rates than others since the financial crisis. It is very important for us to keep this differential to avoid an excessive appreciation of the Swiss franc,” Fritz Zurbruegg said in an interview with Swiss newspaper l’agefi published on Wednesday, but conducted last week before Russia invaded Ukraine.

“As soon as the situation requires it, we’ll raise our interest rate,” he said.

“We’ll keep this ability to intervene in foreign exchange markets if needed to ensure price stability,” Zurbruegg said, adding the franc was a safe haven in times of crisis.

Asked whether the SNB was prepared to accept parity between the euro and the franc, Zurbruegg said the central bank was looking at a basket of currencies to judge the value of the franc and not just one currency pair.

The inflation differential between Switzerland and other countries meant the real exchange rate of the franc was on the same level as before the COVID-19 crisis.

Zurbruegg reiterated the SNB expects inflation to peak this year before falling next year, but said it was too early to judge the possible long-term consequences of the current geopolitical crisis.

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Asked whether the SNB could be flexible as inflation approached the upper end of its target range of 0 to 2%, Zurbruegg said: “Experience has shown that having some leeway within the range we associate with price stability has worked well in the past in Switzerland.”

“We are a small, open economy with capital flows linked to our safe-haven status. We cannot always achieve a precise target and inflation can fluctuate in the short term because we aim for the medium term,” he said.

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