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SNB's Zurbruegg pledges willingness to intervene on strong franc
[ZURICH] Swiss National Bank Vice President Fritz Zurbruegg said the economic backdrop remains far from normal and kept alive policy makers' ongoing threat of currency interventions to tackle the "overvalued" franc.
"Under certain conditions, however, the SNB is prepared to intervene directly in the foreign exchange market," Zurbruegg said in the text of a speech for delivery at a business conference on Wednesday in Zug, Switzerland. "This applies especially in the prevailing environment." Since dropping its currency cap a year ago, the central bank has relied on a twin strategy of negative rates and interventions to keep the franc in check. The SNB has a deposit rate of minus 0.75 per cent.
"These measures demonstrate that business as usual is still a long way off," he said, adding that the franc had deviated about 15 per cent from its long-term average.
"At the same time, the global economic recovery is still not firmly bedded in." The SNB predicts Swiss growth will accelerate about 1.5 per cent this year, up from just under 1 per cent in 2015. It forecasts a inflation rate of minus 0.5 per cent for 2016, accelerating to more than 1% in 2018, according to the institution's December forecast.