Agustín Carstens, head of the Bank for International Settlements, praised the Swiss Central Bank’s monetary policy on inflation.
The head of the Bank for International Settlements (BIS), Agustín Carstens, believes that Switzerland does not manipulate its currency. The Swiss National Bank (SNB) does not pursue any exchange rate targets, he explains in the “Neue Zuercher Zeitung”.
“The demand for Swiss francs is a side effect of the very loose monetary policy conducted around the world,” adds the 62-year-old financial expert in an interview broadcast on Saturday by the Zurich newspaper. As the Swiss economy is not able to absorb all these flows, the SNB must intervene, he continues. “Buying foreign currency is a defensive measure.”
The official praises the Swiss Central Bank’s monetary policy on inflation. “For Switzerland, we can say that it did well to set a range of 0 to 2%”. The inflation interval is more adequate than an absolute number, according to him. It is crucial that a central bank does not weaken its goal of low inflation by changing its strategy, he stresses.
Still some leeway
Agustín Carstens does not consider that central banks have used all their cartridges in the crisis linked to the Covid-19 pandemic with low or negative interest rates. “There is still sufficient room for maneuver,” he explains. Monetary institutes “can use their balance sheets creatively,” he said. They can also influence expectations on the future path of interest rates through their communications, notes the expert.
Central banks have certainly crossed red lines with their recent monetary policy: “But they did so in full awareness of the risks”. “We are there, because the circumstances are difficult,” explains the boss of the BIS, which is considered the bank of central banks.