Bloomberg News

SNB Is Ready to Act on Swiss Franc, Danthine Tells FuW

November 17, 2011

(Updates with quotes on inflation and economy, starting in sixth paragraph.)

Nov. 11 (Bloomberg) -- The Swiss central bank is ready to act further on the Swiss franc after introducing a limit on the currency versus the euro in September, Swiss National Bank Governing Board member Jean-Pierre Danthine said.

“We are monitoring the development constantly and are ready to take further measures if needed,” Danthine said in the pre-release of an interview with Finanz und Wirtschaft newspaper in Zurich, to be published tomorrow. “The Swiss franc is still highly valued,” Danthine added.

The Zurich-based SNB, led by Philipp Hildebrand, imposed a cap of 1.20 francs versus the euro for the first time in three decades on Sept. 6 after investors sent the franc 17 percent higher against Europe’s shared currency in the previous 12 months. It approached parity on Aug. 9, strengthening to a record 1.0075 per euro, while boosting the threat of deflation, weighing on growth and increasing the relative cost of exports.

Danthine’s remarks were confirmed by SNB spokesman Walter Meier. The interview was conducted on Nov. 8, Meier said.

The franc lost as much as 0.5 percent versus the euro after the interview was published and traded at 1.2396 at 7:36 p.m. in Zurich, down 0.5 percent on the day.

The September decision to introduce the limit on the Swiss franc was based on the economic outlook and the threat of deflation, Danthine said.

“Risk of Decline”

“Should the risk of an economic decline increase -- because of a fall in demand from abroad and the franc’s strength -- there is a serious risk of a deflationary development, given the current drop in consumer prices,” Danthine added.

Swiss consumer prices fell for the first time in two years in October and economists at Credit Suisse Group AG yesterday lowered their inflation outlook for 2012 to 0.4 percent from 1 percent.

Retailers, led by Migros and Coop, and carmakers such as Porsche SE and Volvo AB are slashing prices in Switzerland as the weaker euro makes goods cheaper when paid for in francs.

At its last monetary policy assessment in September, the central bank said it expects consumer prices to decline 0.3 percent next year.

Growth ‘Flat’

“We expect very small gains in consumer prices by year-end and negative inflation next year,” Danthine told Finanz und Wirtschaft. The October price decline “was a surprise only insofar as the inflation decline came earlier than expected. Consequently, inflation is developing within the scope of our projections.”

The governing board member said the SNB still expects the “economic development to be flat” in the fourth quarter. For 2012, the SNB foresees “very moderate” growth, adding that “all in all, the downward risks of the forecast are bigger than the upward chances.”

The Swiss economy may not grow through the first quarter of 2012, BAK Basel economic research institute said on Oct. 27 and cement maker Holcim Ltd. this week said third-quarter profit fell partly on the strength of the Swiss franc.

The outlook for employment and exports has “rapidly and noticeably” deteriorated, Danthine said.

The Swiss National Bank will hold its next monetary policy assessment on Dec. 15 and is expected to maintain its benchmark rate at zero percent, according to the median forecast of 17 economists in a Bloomberg survey.

--Editor: Andrew Davis

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

To contact the editor responsible for this story: Craig Stirling at

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