By John Revill
AARAU, Switzerland (Reuters) – A British departure from the European Union without a deal could hurt international trade, trigger turbulence on the currency markets and hit Switzerland, Swiss National Bank Chairman Thomas Jordan said on Wednesday.
Global uncertainty has risen in recent months, Jordan told an event in Aarau, meaning the SNB had to stick to its current expansive monetary policy to block a rise in the safe-haven franc.
“It all depends whether there is a Brexit with a deal or not,” Jordan said. “If at the end there is a deal, there will be less volatility. If there is a situation without a deal…. then we could have a shock,” he added, making trade harder and hurting Switzerland as an open and export-orientated country.
Jordan said it made no sense to change the SNB’s expansive policy which has seen the central bank deploy negative interest rates and currency market interventions to dampen the rise of the franc, whose high value makes life hard for Swiss exporters.
“It is too early for a change in monetary policy,” he said. “The situation remains fragile and uncertainty has increased,” he added, saying a change could trigger a rise in the franc, which still remained “highly valued”.
The interest rate spread between Switzerland and other countries remained important, he said, although he acknowledged the concerns of pension funds who have seen the returns on their investments shrivel in the negative-rate environment.
Still, if the SNB were to change policy, the negative impact on the Swiss economy overall would affect everyone, Jordan said.
The SNB observed what was happening around the world but the bank used its instruments to reach its own goals of price stability, and was not dependent on what other central banks did.
Analysts agree that the SNB is in a tight spot and unlikely to change policy soon.
“In the current uncertain environment, I really don’t see the SNB changing policy at all,” said Charlotte de Montpellier, an economist at ING Bank. “There is little room for them to maneuver and they will be hoping the franc does not appreciate too much as a result of the Brexit fallout.”
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