Swiss National Bank made the right choice with the Franc

Swiss National Bank made the right choice with the Franc

It is easy for stock traders and other monetary investors to blame financial institutions for policy changes, but the Swiss National Bank (SNB) is one massive institution that fully understands the nuances of economic changes vis- -vis global drivers, and willing to protect the economy of Switzerland even if this will hurt a few people on the short term.

The Swiss central bank or Swiss National Bank really spooked the currency and stocks markets when it made a sudden and unexpected move to remove the cap on the Swiss Franc and this decision has been described as a tsunami by industry watchers. The SNB had a choice to continue buying the Euro to save face for a short period of time, but how long that short period of time would last is what the national bank did not know, and it would not be caught in a mess that would be difficult to get out from.

The SNB also had an option to push its short-term interest rates further to the negative side, but the bankers knew better that interest rates should be positive because of future spikes.

The decision has been a surprise for markets you can t do it in any other way, SNB President Thomas Jordan told reporters in Zurich on Thursday. We came to conclusion that it s not a sustainable policy.

Many experts criticize the effort of the SNB in that the financial institution has laid its reputation for reliability on the line, moreso many players within the financial markets would lose out in the end and some others would benefit immensely from the SNB decision. However, since the cap was only three-years old, any other alternative would have made the SNB and the Swiss people to lose a huge amount of money while traders from around the world smile to the banks.

The SNB s move to cap the Franc signified a coy admittance of the fact that Switzerland is too small to dictate its own exchange rate while telling richer investors and international players to go away with their money, but removing the artifice in this way is actually returning to reality. Eventually, traders within the real economy would have had to accept the fact that the Swiss franc exchange rate was unsustainable at the rate it was going.

Swiss National Bank made the right choice with the Franc

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