Thomas Jordan, President of the Swiss National Bank (SNB), takes a break during the Swiss International Finance Forum in Bern, Switzerland.
Matthew Lloyd | Getty Images
LONDON – The president of the Swiss National Bank, Thomas Jordan, has rejected the US decision to call Switzerland a “currency manipulator”.
The U.S. Treasury on Wednesday added Switzerland to the list of countries it suspects have deliberately devalued its currencies against the U.S. dollar.
Jordan told CNBC on Thursday that neither the SNB nor Switzerland itself have artificially manipulated the value of the Swiss franc.
“Our monetary policy is necessary, it is legitimate and we have a very low inflation rate (it is even negative at the moment), so we have to fight this deflation and the Swiss franc is very strong, so which was appreciated in nominal terms over the last twelve years, both against the euro and against the US dollar, ”he said.
The Swiss National Bank has long maintained that it is willing to intervene more robustly in the foreign exchange markets and has strongly denied the manipulation of the Swiss franc. The U.S. Treasury said Swiss interventions reached 14% of GDP (gross domestic product).
To qualify as a manipulator, countries must have a bilateral trade surplus of more than $ 20 billion with the United States, foreign exchange intervention in excess of 2% of GDP, and a global current account surplus in excess of 2%. of GDP.
Treasury Secretary Steven Mnuchin said his department had taken a “strong step” to “safeguard economic growth and opportunities for American workers and businesses.”
Treasury Secretary-designate Joe Biden and President-elect Janet Yellen could review the findings when she delivers her first foreign exchange report, expected in April.
Faced with the impending change of administration, Jordan said the SNB looked forward to an “intensive and constructive dialogue” with Biden’s team.
“We will try to explain the specific situation of Switzerland in relation to these criteria and re-explain why these criteria do not come to the right conclusion with respect to Switzerland and that we can show that we are not a currency manipulator,” he added. .
Earlier on Thursday, the SNB maintained its monetary policy position unchanged, keeping interest rates at a record low of -0.75% and setting a cautious tone. The Bank said a second wave of Covid-19 infections is likely to mean a weaker fourth quarter in 2020 and the first quarter of 2021, noting that “factors of production will remain underused for some time to come.” .
“Storm in a cup of tea”
David Oxley, senior European economist at Capital Economics, suggested on Thursday in a note that Switzerland will be able to recover its interventions in the foreign exchange markets next year.
“However, this is because we expect a recovery in the sense of risk to ease the pressure on the franc against the euro, not by the actions of the US Treasury,” Oxley said.
“The big picture is that Switzerland has always been treated as a special case when it comes to exchange rate policy and even the U.S. Treasury has admitted that Switzerland’s economic situation is“ distinctive ”and that the its monetary policy options are limited by small stocks of domestic assets. “
With the Biden administration’s forecast, which would become less adverse in its approach to trade and international relations, Oxley suggested that this issue could be a “storm in a cup of tea”.
Chief Economist of High Frequency Economics Carl Weinberg disagreed Thursday with the characterization of the Treasury and suggested it could also be temporary.
“I certainly don’t understand how declaring the Swiss as currency manipulators advances the interests of the United States or makes anything better for anyone doing business, and of course there are no consequences to being labeled as to currency manipulator.is what the current Secretary of the Treasury is doing, and in a few months there will be a new Secretary of the Treasury, “Weinberg told CNBC’s” Squawk Box Europe. “
He suggested that the incoming administration would focus more on trying to “build friends around the world instead of establishing antagonistic relationships.”