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The Swiss National Bank’s surprise decision a year ago to remove its ceiling on the franc was justified, according to the vast majority of economists in Bloomberg’s monthly survey.
The SNB abandoned the cap on Jan. 15 of last year, saying interventions to sustain it would have been out of proportion to its economic advantages. With the benefit of 12 months of hindsight, all but two of 23 economists answered that the move was indeed right.
“The SNB couldn’t have gone on forever defending the cap, as the overall cost, both politically and economically, was too high,” said Alan McQuaid, chief economist at Merrion Capital in Dublin. “All things considered, Switzerland hasn’t done too badly in the aftermath of the currency change.”
The franc surged against the euro after the cap was given up, and finished 2015 roughly 10 percent stronger against the common currency. Abolishing the ceiling in anticipation of large-scale asset purchases by the European Central Bank caught investors off guard, especially because Swiss policy makers had affirmed the strategy just a few days before.
Karsten Junius, chief economist at Bank J Safra Sarasin in Zurich, said it would have been “extremely costly” to defend the policy against the impact of ECB quantitative easing. Still, in his view, “the timing and communication of the measure remains poor.”
By Catherine Bosley and Andre Tartar, Bloomberg.