Loading ...The Swiss National Bank has lost control. It is the latest in a list of venerable central banks to be overwhelmed by deflationary forces and global economic disorder.
The country is already in deflation. The Swiss franc ended Thursday 13pc higher after the SNB abandoned its three-year efforts to defend a currency floor of 1.20 to the euro. “We have a free exchange rate once again,” said the SNB’s president, Thomas Jordan.
Indeed, but nobody is fooled by the SNB’s attempt to spin this as benign. “This is a huge hit to their credibility,” said Deutsche Bank.
The official statement claimed that the exchange floor is no longer needed and that “overvaluation has decreased as a whole since the introduction of the minimum exchange rate”. This is eyewash.
“They have had to throw in the towel. They couldn’t hold the line anymore,” said David Owen, from Jefferies Fixed Income. “This is going to cause extreme pain for parts of the Swiss economy but the SNB are trapped.”