SNB Leaves Policy Vacuum

The Swiss National Bank (SNB) had little choice but to abandon its three-year-old cap on the franc but its execution of the move left a vacuum of policy uncertainty where a pillar of stability stood before.

With the euro diving against the dollar as the European Central Bank gears up for fresh stimulus as early as next week, the SNB felt the 1.20-francs-per-euro cap was not sustainable and chose to give it up rather than accumulate further risk.

Yet in pulling off the move, the SNB – a conservative institution in a safe-haven state – failed to tip off its peers and shocked investors, who were left wondering whether central banks are now less a source of stability and more one of a risk.


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