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The Swiss National Bank is ready to intervene and address the rapidly strengthening franc but negative interest rates “remain necessary” for the time being, SNB Governing Board Member Andréa Maechler told Schweiz am Wochenende.
The SNB is following the situation in the FX market very closely and is “ready to intervene if necessary,” Maechler said in an interview published Saturday by the Swiss newspaper.
The Swiss franc neared parity with the euro on Friday due to concerns about the economic effect of strict sanctions on Russia. The franc hasn't been this strong since 2015 when the SNB unexpectedly scrapped its cap on the franc's value against the euro.
“At the beginning we noticed that the appreciation was rather small compared to the global uncertainties,” Maechler said. “That has changed over the course of the week.”
The EU is Switzerland's main trading partner and the alpine nation exported 108 billion euros ($118 billion) worth of goods to the EU in 2021 -- mostly chemicals, medical products, machinery, instruments and watches.
Maechler acknowledged that inflation has accelerated in Switzerland -- particularly prices for raw material and food -- but the SNB expects global inflation to “normalize” and eventually fall over the medium-term.
She said not to expect any reversal of the SNB's negative interest rates, adding that any decision to do so “will not be decided on the fly.” Policy makers will end negative interest rates as soon as they can but in the current situation, it's still necessary, she said.
Maechler told the newspaper that the SNB is evaluating its holdings to ensure they comply with the new sanctions on Russia.
She said less than 0.05% of the SNB's foreign exchange reserves are connected to Russia, which equates to less than 474 million Swiss francs ($518 million), according to Bloomberg calculations.
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