Discussion Board

Capstone I 

Week 3

9/18/2018

Thomas Jordan, the chairman of the governing board of the Swiss National Bank (SNB), and his SNB colleagues are caught between the forces of a strong economy and a strong franc.

The currency was put back where it was a year ago because of investor unease about Italy, Turkey, and Argentina. According to the Bloomberg article, this is keeping the SNB alert about a damaging appreciation. This move came along with a strong economic outlook, which puts Jordan in a bad position. It makes it harder for Jordan to justify the current negative interest rates and intervention pledge.

According to Nadia Gharbi, an economist at Pictet in Geneva, the SNB will continue with the same monetary policy, saying that “the situation on the foreign exchange market is too fragile to allow them to make changes”.

The currency has appreciated lately, standing at 1.12527 per Euro at 1:54 PM in Zurich on Tuesday. Economists in a Bloomberg survey expect the deposit rate to remain -0.75%, which is the lowest of any G-10 central bank.

Inflation is within the below 2% range defined as price stability. The price growth is 1.2%. The SNB will update its outlook for growth and inflation on Thursday. Economists in a Bloomberg survey predict an economic growth of 2.6% for this year and 1.8% in 2019.

Credit Suisse is pushing its forecast for a rate hike by half a year to September 2019.

 

https://www.bloomberg.com/news/articles/2018-09-18/snb-walks-policy-tightrope-as-franc-overshadows-strong-economy

This article was created on September 18, 2018, 12:00 AM EDT, and updated on September 18, 2018, 7:55 AM EDT.

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