On the other, the weakening of the euro has put Swiss producers in a bind versus their European competitors and presented problems for Switzerland’s monetary policymakers. Stability and instability in relation to European currencies Over the course of several decades, the Swiss franc has appreciated against all European currencies. This applies not just to the nominal, but also to the real exchange rate (i.e. the exchange rate adjusted for the inflation differential between the Swiss franc and the relevant foreign currency), which is an important determinant of Switzerland’s international competitiveness. So, while the appreciation we have witnessed in recent years is certainly very pronounced, it is not entirely new. BIS central bankers’ speeches  1  Our currency has frequently experienced upward surges – often in conjunction with shortterm increases in exchange rate volatility. In the 1970s and 1980s, for instance, the Swiss franc appreciated substantially against all European currencies amid major fluctuations. The exchange rate to the German mark – which remained relatively stable – was an exception. This was due to structural similarities between the two countries’ economies and to the fact that both the German Bundesbank and the SNB operated according to comparable monetary policy principles at the time. Both institutions were focused on money supply targets and pursued a policy geared towards maintaining price stability. In the 1990s, monetary policy in most of the EU countries was dominated by preparations for the launch of the European single currency.
Thomas Jordan: The euro and Swiss monetary policy Speech by Mr Thomas Jordan, Chairman of the Governing Board of the Swiss National Bank, at the Europa Forum Lucerne, Lucerne, 2 May 2016. *  *  *  The speaker would like to thank Tobias Cwik and Mathias Zurlinden for their valuable support in preparing this speech. He also extends his thanks to Petra Gerlach and Carlos Lenz, as well as to Communications and Language Services at the SNB. When the euro was created almost two decades ago, there was considerable uncertainty about how the currency would impact Switzerland. My predecessors on the Governing Board of the Swiss National Bank regularly commented on subsequent euro developments in speeches and frequently voiced their expectations and concerns. Things ran fairly smoothly in the first few years; but the financial and debt crisis rocked the currency union and put the euro under pressure. The SNB has responded with a flexible and pragmatic monetary policy. As the difficulties have not yet been overcome, it is too early to draw definite conclusions. One thing is clear, however: getting to grips with the challenges we face has been – and remains – harder than the cartoon character in the picture suggests (cf. chart 1). From the SNB’s point of view, the experiences of recent years have once again highlighted the importance and value of monetary sovereignty. Monetary sovereignty has its price, of course, but it remains true that the interests of our country are best served by retaining this independence.