SNB IN A TIGHT SPOT AFTER FED’S CORONAVIRUS CUT

0
158

The Swiss National Bank will probably participate in any concerted action by central banks to shore up the global economy in response to the coronavirus epidemic, the former deputy governor of Ireland’s central bank said Tuesday.

“My suspicion is, if there is coordinated action, the SNB will play along even though they may prefer not to do anything right now,” Stefan Gerlach, chief economist of EFG Bank, told CNNMoney Switzerland.

“It is really key for such an open economy as the Swiss economy to be fully engaged in international monetary policy developments,” he said.

The U.S. Federal Reserve cut rates by half a percentage point Tuesday, saying the coronavirus “poses evolving risks to economic activity.” Markets expect other central banks to follow suit.

On Monday, the Organization for Economic Cooperation and Development said that the virus would take a heavy toll on global growth if it spreads widely outside of China.

Earlier on Tuesday, finance ministers and central bankers from the G-7 countries said they were ready to use “all appropriate policy tools”—including possible fiscal stimulus measures—to cushion the impact.

The coronavirus comes at a tough time for the SNB. In January, the U.S. put Switzerland on its list of countries suspected of manipulating exchange rates to gain a trade advantage. The franc strengthened to multiyear highs as traders bet that the move would make it harder for the SNB to intervene in markets.

Then last week, the currency climbed to its highest since July 2015 as investors dumped stocks and sought shelter in haven assets. It was trading around 1.07 to the euro late Tuesday.

The SNB has already gone to extraordinary lengths to discourage investors from buying the franc, which undermines Swiss exporters. Switzerland has the world’s lowest rates at minus 0.75 percent, introduced after it abandoned its cap in 2015.
Whether the SNB goes deeper into negative territory may depend on the European Central Bank.

Gerlach, who served as deputy governor of the Central Bank of Ireland between 2011 and 2015, said that while the Fed move puts pressure on the ECB to also act, it is unlikely to do so quickly. ECB President Christine Lagarde needs to persuade the Governing Council that joint action is necessary now, he said.

“I suspect that there are several members of the Governing Council who don’t think that this is something that needs to get done right now,” he said.

WATCH MORE

Coople cashes in on the growing gig economy
Coople, the Swiss-founded on-demand recruitment platform, just bagged USD 32 million in a Series C round from investors, including Goldman Sachs. Three years after the company expanded into the UK, it plans to use some of the funding to launch in the Netherlands and “one other international market.”

Switzerland seeks tighter trade ties with East Africa
A trade mission from Switzerland will head to East Africa next month as the continent tries to move beyond oil and mining. The region, one of the world’s fastest-growing economies, has taken ‘’huge steps’’ to lower trade barriers, says Barnaby Fletcher, regional associate director for the consulting firm Control Risks.

Appetite grows for renewable infrastructure investment
Infrastructure projects in the renewable sector have become increasingly attractive, with average running costs halving over the past decade, according to Jean-Francis Dusch, global head of infrastructure at Edmond de Rothschild Asset Management. He predicts growing investor appetite for these projects in the future.

Novartis “on track” to bring one of the most expensive drugs to Europe
From medical acquisitions to tech developments and even an additional possible share buyback in the future, Novartis CEO Vasant Narasimhan explains how he plans to spend as free cash flow jumps 26 percent in the latest results. In an interview with CNNMoney Switzerland’s Hannah Wise, Narasimhan reaffirms plans to bring the highly controversial drug Zolgensma to Europe.

A stock exchange that measures social returns
As impact investing gains in popularity, the industry is coming under mounting pressure to develop standards for evaluating real change. Karen Wendt, CEO of Eccos Impact, says one “market solution to end the mess” would involve setting up a stock exchange for these assets.

Expect more green regulations in wake of elections, says UBS economist
With Switzerland’s two green parties making historic gains in national elections yesterday, UBS Switzerland’s chief economist Daniel Kalt says he expects more regulations to come concerning sustainability. But he warns against bans or excessive government intervention, calling for incentives such as a tax on carbon emitting fossil fuels instead.

A “free for all” direction in trade not the way to go, says Evenett
Ahead of the IMF meeting in Washington D.C. and the Brexit vote in the UK, Simon Evenett of the University of St. Gallen talks about the future of multilateral agreements and globalization in general. In his view, the large economies are moving in a “free for all” direction where countries won’t respect the rules and will grab as much market share of the world market as they can. “I think it is the wrong way to go,” says Evenett.

Climate is a key issue in Swiss national elections
Climate concerns are key among voters ahead of this Sunday’s national elections. Turnout is also expected to pass 50 percent for the first time in 40 years.