"1.20 is still necessary because we can't be sure what will happen in the Eurozone "
- SNB governing board member Fritz Zurbruegg
The Swiss National Bank's cap on the nation's currency still remains a key policy instrument, that is not likely to be removed anytime soon, the SNB board member Fritz Zurbruegg said Tuesday. Despite some positive signs from domestic economy, risks for the recovery remain high, especially from the neighbouring Eurozone which is in the recession for 18 months already. Without the cap, further uncertainty can lead to a much bigger jump in Swiss Franc's value against the Euro, adding more pressure on the policy makers. Therefore, the SNB is still considering the cap as a vital tool, which can prevent the country from falling into recession.
Earlier this month the Swiss National Bank decided to retain the currency ceiling at 1.20 per Euro, saying risks to the economy from external developments remain high. The SNB President Thomas Jordan pointed out that a highly valued Swiss Franc may compromise price stability and is posing serious consequences for the economy. The SNB also projected a weaker growth for the second quarter, however, for the full 2013, the SNB predicts an expansion between 1% and 1.5%, underlying the downward pressures from other economies. Such factors as weaker global growth, deepening sovereign debt and financial crisis in the Eurozone as well as tensions on the global markets will keep weighing on the performance of the Swiss economy.
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