Swiss National Bank’s Zurbruegg Says Not Focus of Monetary Policy to Curb Risk to Financial System Vulnerabilities

The Swiss National Bank Vice Chairman Fritz Zurbrügg in a speech in Geneva Tuesday said the focus of monetary policy is price stability and economic developments, and not curbing financial system vulnerabilities”. He added “Moreover, we have observed an increase in affordability risks over recent years.”

Swiss National Bank

“In Switzerland, vulnerabilities in the residential real estate and mortgage markets have increased since the onset of the pandemic,” Zurbruegg said in a speech in Geneva.

“Moreover, we have observed an increase in affordability risks over recent years.”

With many of the Central Banks around the world raising rates including the Federal Reserve, The Bank of England and The Brazilian Central Bank he had this to say;

“Monetary policy has no influence over these factors. Even more importantly, the focus of monetary policy is price stability and economic developments, and not curbing financial system vulnerabilities,” he said.

At the of the month, he reiterated that The Swiss National Bank will keep intervening in foreign exchange markets to ensure price stability and needs to have lower interest rates than others to avoid an excessive appreciation of the Swiss franc in a newspaper interview.

“Switzerland has always had lower rates than others since the financial crisis. It is very important for us to keep this differential to avoid an excessive appreciation of the Swiss franc,” Fritz Zurbruegg said in an interview with Swiss newspaper l’agefi conducted last week before Russia invaded Ukraine.

“As soon as the situation requires it, we’ll raise our interest rate,” he said.

Asked whether the SNB could be flexible as inflation approached the upper end of its target range of 0 to 2%, Zurbruegg said: “Experience has shown that having some leeway within the range we associate with price stability has worked well in the past in Switzerland.”

“We are a small, open economy with capital flows linked to our safe-haven status. We cannot always achieve a precise target and inflation can fluctuate in the short term because we aim for the medium term,” he said.

Source: SNB Reuters

From The TradersCommunity News Desk