At such a time, it would be possible for established market access channels, via electronic trading platforms or phone links to the trading desks of the main currency trading firms, to be widely used – although there were some bottlenecks immediately after the announcement. By contrast, if we had announced the move at the weekend, for instance, this would have caused uncertainty about the trading conditions when the foreign exchange market opened on Sunday evening (Swiss time). Australia, which normally accounts for only around 1% of daily turnover in Swiss franc forex operations, would have been overwhelmed by the volume of trades during its business hours. You can easily imagine that the turbulence on the Australian market would have been far greater than that observed on the morning of 15 January, with contagion potentially spreading to the entire financial market. We wanted to avoid this. Monetary policy after the minimum exchange rate So what will the minimum exchange rate discontinuation mean for monetary policy in Switzerland? First, let me emphasise that the exit from the minimum exchange rate does not mean that we will simply be a passive observer of the foreign exchange market in future. The SNB will continue to take account of the exchange rate situation in formulating its monetary policy and will intervene in the foreign exchange market as necessary in order to influence monetary conditions. Nonetheless, the end of the minimum exchange rate does mean that interest rate steering will once again take on a more prominent role.
If markets were anticipating such an evolution, spreads between the Swiss franc and euro deposits would progressively shrink, in the same way spreads between German marks and French francs deposits fell in the 1990s during the build-up of the monetary union. Market pressures could then force the SNB to shadow the monetary policy of the European Central Bank. Many observers overlook the fact that, contrary to other countries which have gained an interest rate bonus by joining the European monetary union, as they previously had higher interest rates than Germany, Switzerland would loose its interest rate advantage in joining the monetary union. No tendency of a convergence in interest rates has been observed over the past few years. On the contrary, the interest differential has broadened slightly. For the time being, markets are not expecting any move from Switzerland towards monetary union, and rightly so, I might add. This does not mean that my country will never join the EU. As you probably know, important decisions shaping the relations between the EU and Switzerland have been taken in recent years. A first set of bilateral agreements has already come into effect. It gives us access to the single market and ensures labor mobility. New agreements have now been negotiated with the aim of harmonizing taxation on savings and integrating Switzerland in the Schengen and Dublin frameworks, a further step toward closer cooperation. As you see, without being formally an EU member, Switzerland is increasingly part of the European reality.