Swiss National Bank Chairman Thomas Jordan said Tuesday that Switzerland will continue to enforce its minimum exchange rate, calling it the right tool to ensure financial stability worldwide.
Two years ago the Swiss National Bank enacted a CHF 1.20 per euro minimum exchange rate. Critics have questioned if the rate is creating global imbalances.
Switzerland has not had to enforce its minimum exchange rate in more than a year, Jordan noted during a panel discussion at The Peterson Institute for International Economics in Washington.
“The minimum exchange rate can prevent an undesirable tightening of monetary conditions in the event of upward pressures on the Swiss franc should they intensify once again,” he said, noting that the current risks in the economy alongside a franc currency that still remains high.
Jordan said that surpluses have historically been the norm for Switzerland, and pointed to financial services, trade and direct investment income as the reasons for the surplus. He argued that the surplus has little impact on prices and production in Switzerland.
“Smooth output and consumption are responsible for the surplus, not the exchange rate,” he said.
Jordan said that maintaining the current exchange rate would keep Swiss monetary conditions from becoming overly restrictive for the United States.