The corona virus has a negative impact on the economy and the Swiss franc. The Vice President of the Swiss National Bank does not rule out a cut in the key interest rate.
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Fritz Zurbrügg has been Vice President of the Swiss National Bank since 2015.
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(Gb). The corona virus has an impact not only on public health and the economy, but also on the Swiss franc. According to Fritz Zurbrügg, the Vice President of the Swiss National Bank (SNB), the spread of the Franc virus could increase the value. “In times of uncertainty, investors are increasingly looking for safe havens like the Swiss franc,” said Zurbrügg in an interview with the newspaper Finanz und Wirtschaft (FUW).
Inflation risk increases
The virus is spreading at a time when the Swiss franc cannot stand anything but an appreciation. With little intervention on the market, the SNB could have prevented the Swiss franc from appreciating, the newspaper wrote. And the forecasts for the economy also sounded positive in December. Back then, according to Zurbrügg, the SNB had to anticipate risks such as international trade conflicts and the uncertainties in the Middle East. But she had forecast gradual growth for the economy. “The corona virus has now added a global, stressful element,” said Zurbürgg.
A stronger Swiss franc also increases the risk of inflation. Zurbrügg said: “Because Switzerland, as a small, open economy, is so dependent on international developments, on the exchange rate and on raw material prices, inflation can temporarily turn negative here.” With the monetary policy, the SNB could guarantee price stability in Switzerland. Even if, according to Zurbrügg, there is no pending review of the current monetary policy concept, there is no guarantee that the key interest rate will remain at the current level: “If we come to the conclusion that the monetary conditions need to be adjusted, we will continue to lower the SNB key interest rate” he told the FUW. For the SNB, however, it is not crucial how the European Central Bank behaves, but what the prospects for economic and price developments in Switzerland are. When monetary policy abroad was relaxed last year, Switzerland continued to find its monetary conditions appropriate.
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