Thursday, June 17, 2010

Sanity Appears to Have Returned to Swiss Central Bank

After a brief flirtation with money printing madness, sanity has appeared to have returned to Swiss National Bank.

WSJ reports:
The soaring Swiss franc is in line to smash through old records and hit new highs against the euro after the Swiss National Bank signaled that it will step away from seeking to hold the currency down.

The central bank shocked market watchers Thursday by expressing no immediate concern about franc strength after its quarterly monetary policy meeting.
Prior to this laissez faire attitude toward the foreign exchange markets, the Swiss central bank was printing huge amounts of francs in a bizarre attempt to hold the value of the franc down. As I pointed out, this would only result in suffering for all Swiss because of the ultimate inflationary consequences. Those consequences have started to appear. WSJ again:
...the SNB gave an upbeat assessment of the country's economic outlook and upped its inflation forecasts. Deflation risks have "largely disappeared," the central bank said, removing one of the key reasons to stop the franc from climbing.
Markets are merciless when dealing with pompous government officials.

No comments:

Post a Comment