GENEVA — It is an irresponsible exaggeration to say the world is in a currency war, even if countries have their differences over adjustment policies, the head of the Swiss National Bank said on Saturday. Among a series of tensions over exchange rates The United States and other countries have been calling on China to revalue, while China has criticized the U.S. easy monetary policy for weakening the dollar and flooding the world with cheap assets. “We are not in a currency war. After all, we’re talking to each other and you don’t do that in a war,” SNB Chairman Philipp Hildebrand said in an interview published on Saturday on the website of the German daily Frankfurter Allgemeine Zeitung www.faz.net.
Hildebrand agreed that adjustments in exchange rates could be one of the measures needed to get out of the current difficult situation for the global economy. But a significant appreciation of the Chinese yuan could not occur overnight, he said.
In any case a sudden such move would hurt the Chinese economy’s growth prospects which would not be in the interests of other countries, including the United States. Commenting on criticism by some countries of the easy monetary policy of the Fed, which is widely expected next week to embark on another round of quantitative easing — printing money to buy bonds and drive down interest rates — Hildebrand said he was confident the Fed would take into account the global impact of its actions. But he noted that unlike the European Central Bank or SNB, the Fed has a mandate to promote employment as well as price stability. Turning to the SNB’s own interventions to hold down the franc, which stopped in June, Hildebrand said the Swiss central bank did not have a currency target, but had sold francs in pursuit of its goal of price stability, specifically to avoid deflation which could create an economic crisis. The impact of the stronger franc on Swiss business has so far been muted. Hildebrand said Swiss companies were flexible and it would anyway take some time for the appreciation to have an effect. “Meanwhile we can see that exports are no longer having a positive stimulus on growth,” he said, repeating the SNB’s view that growth will now slow, especially in the first half of next year. Stability in Europe, Switzerland’s biggest market, was also a major factor on the franc exchange rate, he noted.