The USA now classify Switzerland as a currency manipulator. The US Treasury Department states that Switzerland meets all the criteria for this. The designation as a currency manipulator does not lead to any immediate consequences, but such branding is not exactly useful for the exchange of goods with the USA.
“Switzerland carried out a unilateral intervention on a large scale. Significantly larger than in previous periods to prevent the franc from appreciating and reduce the risk of deflation, ”the report said. The US Treasury Department concludes that at least some of the Swiss interventions served to prevent balance of payments adjustments. Washington’s advice to the SNB is to move to “quantitative easing”. The monetary policy mix can thus be better balanced.
Switzerland is lucky in adversity. Donald Trump is spending the last few days in the White House, so there are probably no more immediate consequences. But Joe Biden will probably also keep an eye on countries that actively influence their currency. However, the handling will be much more conciliatory. In Washington, people will pick up the phone more often in the future and talk to one another on the phone. So today’s judgment comes at a favorable time for Switzerland.
The SNB should use today’s judgment as an opportunity to judge its monetary policy critically. Foreign exchange market intervention cannot become a permanent tool. In Switzerland, economic liberality is very important. This does not fully fit in with the fact that the market forces on the foreign exchange markets are limited at the same time. In this context, one dimension should also be considered: the SNB’s total assets, measured in terms of gross domestic product, are the largest in comparison with the world’s most important central banks. The Washington criticism is therefore not entirely unjustified.
Livestream on December 14th, 2020 from 6 p.m .:
With Hans-Werner Sinn, former President of the Ifo Institute: Corona and the miraculous increase in money in Europe
– Here is the stream! –