The Swiss franc is likely to hold steady or ease this year, Swiss National Bank Chairman Thomas Jordan said in an interview with Swiss radio SRF on Saturday.
He cautioned, however, that the franc’s safe haven status “means that, when uncertainties arise, the franc can be in demand.”
Almost exactly one year ago, Switzerland’s central bank shocked financial markets by abandoning a cap of 1.20 francs per euro it had defended for more than three years to shield the export-oriented economy from the pain of an over valued currency.
“We expect the franc to stay on its (current) level or to weaken slightly,” Jordan said in reply to a question about his expectations for the Swiss economy in 2016.
“If the franc weakens a lot, that would be very good for the economy, exports would be much better and growth would accelerate. If the franc appreciates, it will go the other way,” he said in an interview with the Samstagrundschau program.
In December 2014 the SNB introduced negative interest rates, a move Jordan defended in a separate interview with Swiss television on Friday.
“We introduced negative interest rates and we are ready to intervene in the forex market. Both measures together should relieve the pressure on the franc and help the franc weaken further over time,” Jordan said in the radio interview.
The Swiss franc soared as much as 30 percent against the euro after the SNB lifted the cap on January 15 last year, but stabilized at around 1.08 per euro in the second half of 2015.
Asked at which level the SNB would intervene in the forex market, Jordan said: “After the cap was lifted, we had a very strong appreciation. It has eased in the meantime.”
He also said the SNB did not have an implicit minimum exchange rate. “We do not only look at the euro, but at the currency situation as a whole,” he said.
Jordan reiterated that the Swiss franc was significantly over valued, especially against the euro, but said that keeping the minimum exchange rate would have done more harm than good.
“We are firmly convinced that without this decision, the consequences would have been worse. We would have completely missed the moment where we could still exit the minimum exchange rate in a reasonable way.”
The strong franc has taken its toll on the performance of many Swiss companies — economic growth ground to a halt in the third quarter — and will likely continue to do so well into 2016, the KOF leading indicator showed last month.