Bloomberg News

Hildebrand Says SNB Will Defend Franc Cap With All Measures

September 30, 2011

(Updates with comments from Hildebrand in second paragraph.)

Sept. 30 (Bloomberg) -- Swiss central bank President Philipp Hildebrand said policy makers are ready to use “all measures” to protect their franc cap.

“The ceiling is there and it will be defended,” Hildebrand said at an event in Geneva late yesterday. He declined to give details or comment on the extent of the central bank’s currency purchases to maintain the cap, calling the measure “totally credible.”

The Swiss National Bank on Sept. 6 imposed a franc ceiling of 1.20 versus the euro and resumed purchases of foreign currencies to protect exports such as Swatch Group AG watches and ward off the risk of recession. Vice President Thomas Jordan said on Sept. 28 the central bank’s “clear commitment” means it’s being “taken very seriously in the market.”

The franc, considered a haven in times of turmoil, has remained above 1.20 versus the euro since the SNB imposed the ceiling. It reached an all-time high of 1.0075 on Aug. 9 as European leaders struggled to contain the region’s debt crisis and traded at 1.2199 at 9:41 a.m. in Zurich.

‘Absurd Overvaluation’

Hildebrand said while Swiss economic growth will weaken in the second half, the cap helped lower the threats of recession and deflation. The Swiss currency had shown an “absurd overvaluation,” he said, when calling the euro region’s fiscal crisis the biggest threat to the global economy.

With exports accounting for about half of gross domestic product, the Swiss economy has been vulnerable to a strengthening currency. The KOF Economic Institute on Sept. 27 cut its growth forecasts for both this year and next, and said the franc remains overvalued. The government said earlier this month the economy may fail to grow in some quarters.

The SNB earlier this month lowered its inflation forecasts through 2013 and projected consumer prices to drop 0.3 percent next year. The central bank sees inflation at 1 percent in the second quarter of 2014, according to latest projections.

“Today, there’s absolutely no risk of inflation and that’s why this ceiling is this credible,” Hildebrand said. The SNB is a “transparent central bank.”

The Zurich-based SNB will publish currency holdings for September next week. Before imposing the cap, the central bank’s currency reserves jumped to 253.4 billion francs ($280 billion) at the end of August.

--Editors: Simone Meier, Jennifer M. Freedman

To contact the reporter on this story: Klaus Wille in Zurich at

To contact the editor responsible for this story: Matthew Brockett at

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