Switzerland’s central bank chief on Friday defended the institution’s shock decision to scrap efforts to stop the overheated Swiss franc from rising, insisting the turbulence rocking markets and the Swiss economy should settle.
“You must remember that the currency cap from the beginning was supposed to be an exceptional and temporary measure,” Swiss National Bank (SNB) Chairman Thomas Jordan said in an interview published in yesterday’s editions of Swiss dailies Le Temps and NZZ.
“It was always meant to be abandoned,” he said, stressing that the bank’s massive efforts to hold down the currency were no longer warranted.
Photo: EPA
“If the [economic] objective is no longer justified or sustainable, we should stop the exercise. We reached that point,” he said.
The bank, he said, had determined that if it had continued its policy “it risked losing control of its monetary policy in the long term.”
Jordan’s comments came a day after the SNB stunned markets with its decision to abandon the minimum rate of 1.20 Swiss francs against the euro that it had been defending for more than three years. The Swiss currency immediately gained nearly 30 percent against the euro, before stabilizing at about parity — which is still 15 percent higher than Wednesday’s rate.
The rate was introduced as the eurozone crisis sent investors scurrying to the safe haven currency. More recently, the Russian ruble crisis put renewed pressure on the franc.
As late as Monday last week, SNB Vice Chairman Jean-Pierre Danthine insisted in a media interview that the bank would continue defending the policy.
The soaring franc caused panic on global markets, bankrupted foreign exchange traders as far away as New Zealand and was seen as a significant threat to Switzerland’s export-dependent economy.
The Swiss stock exchange’s main SMI has plunged more than 14 percent since Thursday morning.
“We were aware that this decision could have a major impact on markets,” Jordan said.
“The markets should gradually stabilize,” he said, admitting that “it could take time.”
When asked if the SNB might reintroduce a cap on the franc if the markets did not settle, Jordan said that if there was a clear need, the bank “would be active on the exchange markets.”
Jordan said the bank directors had unanimously agreed to scrap the cap, insisting the Swiss economy was in a much better place than it had been when the cap was introduced in 2011.
“We gave the Swiss economy time to adapt to the new situation. A period of three years is not negligible,” he said.
Now that the cap is gone, Jordan acknowledged that “following this decision, the economic situation in Switzerland is more difficult” and that many Swiss companies would now face “challenges.”
He said that the “SNB cannot fulfil all wishes with its monetary policy. It is not all-powerful.”
Jordan said he understood the barrage of criticism facing the bank after Thursday’s move, but that he was sure the bank had made the right decision.
He brushed aside a comment from IMF managing director Christine Lagarde questioning why she had not been warned before the bombshell announcement fell.
“SNB is an independent central bank. It is our prerogative to prepare our decisions on our own,” Jordan said.
TECH TITANS: Amazon’s latest chip joins Google in competing for the 90 percent market share held by Nvidia, which claims it is ‘a generation ahead of the industry’ Amazon Web Services (AWS) on Tuesday launched its in-house-built Trainium3 artificial intelligence (AI) chip, marking a significant push to compete with Nvidia Corp in the lucrative market for AI computing power. The move intensifies competition in the AI chip market, where Nvidia dominates with an estimated 80 to 90 percent market share for products used in training large language models that power the likes of ChatGPT. Google last week caused tremors in the industry when it was reported that Facebook-parent Meta Platforms Inc would employ Google AI chips in data centers, signaling new competition for Nvidia. This followed the release last month of
INSULATED: The company said it is less exposed to global complications, as it has built a strong footprint worldwide, and has multiple sources of rare earths and raw minerals Merck Group yesterday said it would ramp up production next year at its new flagship facility in Kaohsiung’s Lujhu District (路竹) to satisfy growing demand for advanced semiconductor materials and specialty gases, and to address supply resilience issues amid mounting geopolitical risks. Merck made the remarks during a news conference before the inauguration of its 500 million euros (US$582.1 million) facility, which is also to supply other markets in the Asia-Pacific region, it said. Merck executive board deputy chair and electronics CEO Kai Beckmann told reporters the company adopted a “local-for-local” strategy about seven years ago to address the cycle time of
Two companies wholly owned by the daughter of the founder of Hon Hai Precision Industry Co (鴻海精密) on Monday reported to the Taiwan Stock Exchange that they would dispose of all of the Hon Hai shares they hold. In filings with the exchange, Hong Wei Investment Co (鋐維) said it would sell the 2.771 million Hon Hai shares it holds and Frontier Investment Corp (承鋒投資) said it would sell its 2.409 million Hon Hai shares from tomorrow until Jan. 3 next year. The two companies are wholly owned and chaired by Shirley Gou (郭曉玲), the eldest daughter of Hon Hai founder Terry
RIDING THE WAVE: The race to build AI infrastructure has lifted the valuations of top memory makers, such as Micron, amid dwindling inventories and supply challenges Micron Technology Inc is to spend ￥1.5 trillion (US$9.6 billion) to build a plant in western Japan to make memory chips for artificial intelligence (AI) applications, the Nikkei reported on Saturday. The move comes as Micron seeks to diversify advanced chip production outside of Taiwan, the Nikkei article said, citing people familiar with the matter. The new factory will manufacture high-bandwidth memory (HBM) chips, a key component for working with AI processors such as those made by Nvidia Corp, the report said. Micron would build the facility within the compound of its Hiroshima plant, starting in May next year, with plans to launch
RSS