Tuesday, September 6, 2011

Swiss National Bank Sets Minimum EURCHF Rate at 1.20

The Swiss National Bank (SNB) announced it "will no longer tolerate a EUR/CHF exchange rate below the minimum rate of CHF 1.20".  The Swiss central bank further noted that it "will enforce this minimum rate with the utmost determination and is prepared to buy foreign currency in unlimited quantities".  The SNB explained "The current massive overvaluation of the Swiss franc poses an acute threat to the Swiss economy and carries the risk of a deflationary development." and noted that it is "therefore aiming for a substantial and sustained weakening of the Swiss franc." 

At its most recent monetary policy meeting in June this year the Swiss National Bank maintained its main interest rate at 0.25%.  The Bank had been forecasting inflation of 0.9% during 2011, while 2012 inflation is expected at 1% and 1.7% in 2013.  The SNB also previously announced a series of moves on the 10th and 3rd of August aimed at limiting gains in the CHF, and further intensified its efforts on the 18th of August, but had until now refrained from a specific target.  The EURCHF exchange rate was last reported around 1.2150, having traded around the 1.10 mark earlier in the day.


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