SNB chairman sees no need to act on strong franc

ZURICH: Price stability in Switzerland is not threatened at the moment, giving the Swiss National Bank no reason to spring into action to try to counter the Swiss franc's rise, its chairman was quoted as saying on Sunday.

"The national bank has proven it can take measures. We are going to take appropriate measures to guarantee price stability also in the future," Philipp Hildebrand told Swiss newspaper SonntagsZeitung in an interview.

"Currently (price stability) is not threatened. That means there is no need to act on monetary policy from today's point of view," he said.

He said the current situation was very different from 2009 and 2010 when the SNB prevented a tightening of monetary conditions via its interventions.

"The Swiss economy is growing, unemployment is low and our country has little debt compared with other countries. We see neither deflation nor inflation risks at the moment. The national bank does not need to act," he said.

The SNB intervened in the currency markets from March 2009 to try to stop the franc soaring but dropped the policy in June 2010 after running up record losses. The franc has since risen to new record highs versus the euro and the dollar.

Hildebrand said further book losses were likely given the development of exchange rates. Asked whether he had ever considered stepping down as SNB chairman, he said no.

Hildebrand said slightly higher inflation at the moment was mainly driven by raw material prices but did not impact the SNB's stability target.

He said permanently pegging the franc to the euro was not possible from a legal point of view. Parliament would have to create the legal frame for a fixed exchange rate that would have the disadvantage of lifting interest rates and inflation on euro zone level, he said.

He said he was watching the development of the franc with great concern and expected it to have negative effects on the country's exporters and the economy as a whole in coming months.

Asked about the impact of the European debt crisis on Swiss banks, Hildebrand said the direct danger was not significant, unless the whole financial system was destabilised.

"I think the risks linked to the housing market are far bigger for Swiss banks at the moment," he said.

He said most indices were pointing towards a further rise in prices in the Swiss housing market and banks were ill-prepared for a real estate crisis.

"We have to watch this very carefully, given UBS and Credit Suisse need to further strengthen their capital basis even though they have made great efforts recently."