Does the National Bank devote sufficient attention to the Swiss franc exchange rate?

Jean-Pierre Roth, Chairman of the Governing Board

Delegate conference of the Fédération des Syndicats Patronaux (Geneva employers), Geneva, 16.05.2002

Switzerland as an open economy with an international currency feels the full force of turbulences on the international financial markets. The launch of the euro has changed the monetary policy environment of our country. The question whether the Swiss National Bank pays due attention to the exchange rate development may be answered with a reference to the monetary policy concept: the Swiss franc exchange rate has a firm place in this concept. While it is not a direct monetary policy target, it is nevertheless a significant element of price development and economic prospects. The analyses of the current situation by the National Bank and the subsequent interest rate decisions are based on these two parameters.

While integrating the Swiss franc in the euro area would eliminate exchange rate fluctuations, this would not guarantee Switzerland's competitiveness. The Swiss franc may not be turned into the scapegoat for competition problems that have their roots elsewhere - for example, in obstructions to competition. Conversely, the disadvantages of fixed exchange rates would be considerable: Switzerland would lose its autonomy in monetary policy and its interest rate advantage in relation to the euro area.

With its recent interest rate cuts, which were prompted to a large extent by exchange rate considerations, the National Bank incurred certain risks. The Bank considers these risks to be justified in the present economic situation but will, nevertheless, keep a close watch on price development.