Daily Management Review

Newspaper says SNB says Ready to Adapt in Post-Brexit Market


07/10/2016




Newspaper says SNB says Ready to Adapt in Post-Brexit Market
SNB Chairman Thomas Jordan said in a newspaper interview published recently that the Swiss National Bank must be ready to react flexibly to any short term threats or opportunities arising from Brexit.
 
"The question for Switzerland is to know how best to adapt. Right now it is still a bit premature to talk of risks or opportunities. It's a complicated problem. In the short term, Switzerland must react with flexibility to changes that affect the financial markets and the global economy. In the long term, it must preserve its commercial relations with the European Union, its main partner, but also with the United Kingdom," Jordan told the newspaper Le Matin Dimanche.

He said that retaining market access to both was fundamental.
 
As investors fleeing the plunging pound sought refuge in the franc, the SNB has intervened to weaken the franc after Britain voted on June 23 to leave the EU.
 
Jordan said the SNB was not targeting any particular euro/franc exchange rate even though analysts expect the SNB to continue to be active in the markets to stop the franc strengthening above 1.08 against the euro EURCHF.
 
"Our goal is to reduce pressure on the franc, which remains significantly overvalued," he said.
 
In the face of mounting market pressure, causing an immediate spike in the franc's value, the SNB suddenly dropped the policy of capping the value of franc in January 2015 after the bank had set the upper value of the franc at 1.20 to the euro for over three years.
 
With the SNB relying on negative interest rates and intervention to restrain investors who see it as a shelter from risk, the franc has weakened somewhat and traded in a range of 1.02-1.12 to the euro since then.
 
Jordan said that for the banking sector in Euro zone and for the Swiss bank, uncertainty over Brexit would continue until Britain clarified its economic policy.
 
He also added that it was also the responsibility of the EU to clear the air and the EU should also think about making changes to improve the way it works and deal with the discontent in some member states even as Britain needed to define its future relationship with the EU
 
To make possible more labor flexibility and investment in training, some of the countries within the EU needed to remove barriers to economic recovery, he said.

"It's important that the big countries become engines of growth once again, instead of being brakes," he added.
 
There was need for monetary policies to get support of structural policies even though almost all the central banks globally had used all the available instruments to fuel economic recovery since the global financial crisis.
 
"In principle, you can always take monetary policy further. Lower rates even more or increase money supply. This goes for the SNB too, which is focusing in particular on countering the pressure on the franc," Jordan said.
 
(Source:www.reuters.com) 






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