SNB to Maintain Currency Purchases As Long as Needed, Says Roth

(CEP News) Frankfurt - The Swiss National Bank will continue employing measures to limit the appreciation of the Swiss franc and counteract deflation risks for as long as necessary, SNB President Jean-Pierre Roth said at a general meeting in Bern on Friday.

At its last monetary policy meeting, the SNB announced that it had reduced its three-month Libor target rate by 25 basis points to 0.25% and that it would begin purchasing Swiss franc bonds from private sector borrowers, as well as purchase foreign currency through FX markets in an effort to counteract further appreciation of the Swiss currency.

“In view of the risks of deflation, decisive action was called for, and we will continue to pursue this strategy for as long as the risk remains,” Roth said. “It’s a key operational tool which, under the given circumstances, helps us perform our mandate with regard to price stability.”

The central banker added that the measures taken should not be interpreted as “a form of competitive devaluation” of the currency to support export growth.

“It is simply a case of adapting the implementation of this strategy to an environment characterized by interest rates close to zero and a Swiss franc once again in the role of safe haven,” Roth said.

Turning to the economy, Roth said that the situation in Switzerland may remain “difficult” this year and that the outlook “for the near future is anything but bright”.

“In Switzerland, initial signs of stabilization are appearing here and there, and the decline in gross domestic product should gradually become less steep in the near future,” Roth said.

However, a significant trend reversal is not likely before 2010, Roth added. “Recovery will be a slow process.”

Written by CEP News European Staff, eunews@economicnews.ca

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Posted in Categories: Economy, Eurozone, Releases, Switzerland.

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