GENEVA—The Swiss National Bank will enforce its minimum rate of 1.2 Swiss francs per euro with "utmost determination" and is ready to buy unlimited amounts of foreign currency in any global interbank market to do so, interim president Thomas Jordan said Tuesday.
"We won't tolerate any trading below the minimum rate in the relevant interbank market, and this commitment applies at any time, from the moment the market opens in Sydney on Monday to when it closes in New York on Friday," Mr. Jordan said in a text prepared for delivery at a Swiss-American Chamber of Trade & Commerce function Tuesday.
The SNB introduced the 1.2 francs-per-euro cap in September to stem the Swiss currency appreciation in an effort to alleviate the pressure on the country's exporters and head off the risk of deflation.
This move "corrected the over valuation of the franc to some extent, investment planning for export-oriented companies has been facilitated, and the risk of both deflation and severe structural damage to the Swiss economy has been reduced," Mr. Jordan said.
However, "the situation remains challenging for large sections of the economy, and even at the current rate, the franc is still very strong," Mr. Jordan said. "We expect the franc to weaken over time, and fall back to a level more in line with its economic fundamentals."
Both Mr. Jordan, who is acting head of the Swiss central bank after Philipp Hildebrand resigned in January, and fellow directorate member Jean-Pierre Danthine have repeatedly stressed their commitment in recent weeks to defending the 1.2 francs-per-euro target rate.
As far as the growth outlook is concerned, Mr. Jordan said the "subdued outlook" for the global economy meant Switzerland faces "very challenging" times and gross domestic product will slow "considerably" this year. The debt crisis in the euro region remains the biggest threat to the global economy, he said.
"The still very strong franc is weighing on export performance, and firms are suffering from compressed margins" which may force some to move production abroad, Mr. Jordan said.
As far as prices are concerned, Mr. Jordan said there is "absolutely no risk of inflation in Switzerland" even after the SNB pared its key interest rate to near zero and boosted market liquidity to curb the soaring franc.
However, historically low Swiss interest rates may "lead to imbalances in the domestic credit and real estate markets, which may pose serious risks for financial stability," he said.
"We are well aware of these risks and are analyzing them very carefully, but due to the exceptional monetary policy situation, rates cannot readily be increased to address such threats," he said.
The Swiss government may soon introduce so-called "macroprudential instruments" that can be used to mitigate potential credit and housing market distortions, Mr. Jordan said, without being more specific.
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