The Swiss franc in an international environment

Georg Rich, Director of the Swiss National Bank

Kapitalmarktsymposium der WGZ-Bank Luxembourg S.A., Luxemburg, 10.09.1999

This speech examines the impact of the euro on Swiss monetary policy and the economy. Prior to the introduction of the euro at the beginning of 1999, there were widespread fears in Switzerland that the transition to a common currency would lead to an undesirable upward pressure on the Swiss franc in the foreign exchange markets. These fears have not materialised, however, since the exchange rate between the Swiss franc and the euro remains within a narrow fluctuation band. The stable relation between the two currencies is largely the result of the SNB's monetary stance. By conducting an expansionary monetary policy, the SNB aimed at preventing the Swiss franc from appreciating excessively. It was not a question of keeping the exchange rate stable as such, but the SNB was rather concentrating its efforts on price stability, the main goal of its monetary policy. It felt compelled to keep an expansionary course in order to ward off deflationary trends in the Swiss economy. The speech also ponders the question as to whether Switzerland ought to give up its monetary autonomy and peg the Swiss franc to the euro with a fixed exchange rate. The discussion on the advantages and disadvantages of pegging leads to the conclusion that the SNB should continue to pursue an independent monetary policy aimed at maintaining price stability.