Switzerland's central bank officials have just eaten their words, risking lingering indigestion in financial markets.
Just three days after Swiss National Bank (SNB) Vice President Jean-Pierre Danthine called the franc cap a “pillar” of monetary policy, the SNB yesterday dropped the minimum exchange rate of 1.20 per euro.
The shock abandonment of the SNB's primary policy of the past three years may now leave investors warier of taking officials' words at face value, according to economists including Karsten Junius, chief economist at Bank J. Safra Sarasin AG in Zurich. By scrapping one tool, the franc cap, SNB President Thomas Jordan risks blunting the effects of another.
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