The Swiss franc is still overvalued and the fragile global economic situation warrants maintaining the current currency cap to cushion the economy, Swiss National Bank President Thomas Jordan said Friday.
The Swiss franc is still high even at today's level. Moreover, the downside risks for the Swiss economy remain substantial, he said in a speech at the central bank's general meeting of shareholders. "It is clearly too early to relax our guard."
Jordan said the central bank will continue to enforce the floor rate with utmost determination and stands ready to take further measures at any time. He reiterated that the SNB is prepared to buy foreign currency in unlimited quantities.
Although foreign currency purchases created a huge foreign currency holdings, foreign currency purchases were necessary, he noted. "There was no alternative to the minimum exchange rate."
The SNB has kept the exchange rate of Swiss franc at 1.2 per euro since September 2011.
There is neither a threat of inflation nor a threat of deflation in the foreseeable future. He observed that the price stability continued to be ensured and the Swiss economy has held up relatively well in difficult environment, largely due to the minimum exchange rate.
He did not exclude possibility of increasing the central bank's gold holdings. "As part of a good diversification of currency reserves, a certain proportion of gold can help reduce the balance sheet risk," said Jordan.
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