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ZURICH, Jan 12 (Reuters) - The Swiss National Bank’s cap on the franc at 1.20 per euro will remain its key monetary policy tool, the central bank’s vice-chairman said in a television interview broadcast on Monday.
“We took stock of the situation less than a month ago, we looked again at all the parameters and we are convinced that the minimum exchange rate must remain the cornerstone of our monetary policy,” Jean-Pierre Danthine told RTS.
The SNB introduced the cap more than three years ago to protect the economy from deflation after investors fleeing the euro zone debt crisis piled into the safe-haven currency.
But with expectations high that the European Central Bank could launch a fully fledged government bond-buying programme, or quantitative easing (QE) at its next policy meeting on Jan. 22, the SNB could come under pressure to take further action.
Sources told Reuters last week the option for bond-buying, or quantitative easing, is among the tools the ECB is preparing ahead of its Jan. 22 policy meeting, should it decide to act to address falling consumer prices and a growing risk of deflation in the euro zone.
Danthine said central bankers were not facing a deflationary spiral, although inflationary pressures were extremely weak.
Asked whether it would make it more difficult for the SNB to defend the franc cap if the ECB started repurchasing debt, Danthine said: “We would obviously be affected by a policy of that kind.”
”That being so, it is already very much factored in by the market. The U.S. experience shows that the anticipation of moves like that absorbs a good deal of their effect.
“We’ll have to see what decisions are taken probably next week and their effect on the market,” he added. (Reporting by Tom Miles; Writing by Caroline Copley; Editing by Catherine Evans)