None of these countries' central banks has indicated that it was involved in depreciating its currency. Of course, statements and intentions may not be identical. It may be that the SNB merely acknowledges what other central banks do not. In doing so, however, the SNB is violating a taboo: “Thou shall not engage in competitive depreciations.”
Alternatively, it may be that the SNB mostly wishes to talk the franc down to break the safe-haven effect. Having promptly achieved depreciation, it may have succeeded. In that case, the franc will not move much more in any direction, and there will be no need for further interventions.
Nevertheless, the limited reaction to the SNB move is somewhat surprising. The move came one week after the IMF concluded its annual Article IV visit to Switzerland, and the report has yet to be released; it could make for unusually interesting reading.
Other central banks have not expressed any view, which may suggest that they do not intend to retaliate, at least at this stage. They may have been reassured by the SNB's official statement that the appreciation represented “an inappropriate tightening of monetary conditions,” and that the policy move merely aims “to prevent any further appreciation of the Swiss franc against the euro.”
It may also be that notice has been taken of the precedent, and that those authorities that intend to use it to justify future moves are loath to criticize it. In that case, the generalized silence could indicate that all other central banks entertain the possibility of using that option, which would be most worrisome.
Charles Wyplosz is professor of international economics and director of the International Centre for Money and Banking Studies at the Graduate Institute of International Studies, Geneva.COPYRIGHT: PROJECT SYNDICATE
RSS