The euro's impact on Switzerland and on the monetary policy of the Swiss National Bank

Niklaus Blattner, Member of the Governing Board

Swiss Bankers' Club, Berne, 11 February 2002, 11.02.2002

For about three years now, the euro has existed as deposit money. It has led to fixed exchange rates and a uniform interest rate level in the euro area countries. The introduction of euro notes and coins will have additional positive effects on the economic development in Europe. At present, the conditions for an ideal currency area have probably not yet been completely established, but the Monetary Union will continue to progress.

For large parts of the Swiss economy the euro facilitates business. The Swiss export sector profits from lower transaction costs. Currency devaluations, as previously implemented by some European countries so as to improve their competitiveness, are now a thing of the past. Swiss monetary policy benefits from the fact that a large economic bloc now exists in Europe, which pursues similar goals as Switzerland in terms of monetary policy. The Swiss franc/euro exchange rate is likely to be more stable than the DEM exchange rate used to be. Exchange rate fluctuations are still to be expected, however, as the events after the terrorist attacks in the US showed. As a result of the introduction of euro notes and coins, the euro will probably increasingly be used as a means of payment in the tourism sector and the hotel and restaurant industry as well as in foreign trade. However, the euro will not become a parallel currency. In Switzerland, employment and loan contracts will continue to be concluded mainly in Swiss francs. The same applies to domestic payments.

The SNB's monetary policy concept will remain unchanged: the SNB will continue to conduct an independent monetary policy oriented to the needs of the Swiss economy and to price stability. The interest rate level in Switzerland is likely to remain lower. Exchange rate targets are incompatible with the SNB's mandate. Nevertheless, the exchange rate is an important element in producing inflation forecasts. The SNB will, therefore, continue to attach great importance to the exchange rate when determining its monetary policy.