FRANKFURT (MNI) – The Swiss National Bank is well equipped to
ensure price stability in an environment of excess liquidity, SNB
Governing Board member Jean-Pierre Danthine said Thursday.
In speech text prepared for the delivery at the Money Market Event
in Zurich, Danthine dismissed recent criticism against the central
bank’s interventions on currency markets as unsuccessful and costly.
The SNB was not “defeated by the markets,” Danthine asserted. On
the contrary, the central bank’s forex intervention has contributed to
creating the right monetary conditions for “a reasonably swift recovery”
and price stability, he argued.
The SNB’s intervention was aimed only at averting deflationary
threats and not geared to geared to achieving an exchange rate target,
he explained.
Exchange markets intervention resulted in a book loss of Sfr19.2
billion last year, as the franc’s appreciation eroded the value of its
foreign currency holdings. Nevertheless, Danthine said that “the real
gauge of the potential cost of interventions is not found in the central
bank’s balance sheet.”
“Our foreign exchange interventions will be revealed to have been
costly if they result in serious inflationary pressures two to three
years from now,” Danthine noted.
Danthine said he was confident intervention would not prove to be
costly by that measure: “Since June 2010 the SNB has been setting up and
using instruments that allow us to adapt the conduct of monetary policy
to the new excess liquidity situation,” he said.
“We are convinced that these instruments, reverse repos and SNB
bills of various maturities, which are now fully operational, constitute
an efficient tool set for the times to come,” he said. “They place the
SNB in a sound position to steer the Libor rate to the level required to
maintain price stability.”
Frankfurt Bureau tel.: +49-69-720 142, email: jtreeck@marketnews.com
[TOPICS: M$$CR$,MN$RP$,M$$EC$,M$X$$$,M$$FX$]