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.


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