The Swiss National Bank is prepared to increase its intervention on currency markets if the action can be properly coordinated with other central banks Markus Lusser a member of the Banks three man directorate said. He told a meeting of Swiss industrialists that intervention to support the dollar could not bring about lasting changes in exchange rates unless accompanied by fundamental changes in economic policy. However intervention could send signals that would contribute to a short term smoothing of currency movements. The National Bank was prepared to intensify cooperation with other central banks especially where convincing coordination and significant timing are guaranteed Lusser said. He said currency developments could not simply be talked into existence but needed to be matched by actions in the field of economic policy. Put simply that means that in order to stabilise the dollar in a lasting way a reduction of the budget deficit and a slowdown in money supply growth in the United States are unavoidable he said. The National Bank has intervened in dollar-yen repeatedly in the last few weeks and earlier this week it said it had intervened in dollar-Swiss franc for the first time since last October. Lusser said the key to increased exchange rate stability lay not in currency intervention by central banks but only in an improvement in international economic policy coordination. This meant that industrial countries must avoid abrupt switches in economic policy and give priority to price stability. Lusser said the National Bank continued to take the view that easing its strict monetary policies would be incompatible with its primary goal of combatting inflation. The bank target is for growth of two pct in central bank money supply in 1987. He noted that in 1978 when the Swiss franc rose sharply against all currencies the bank was forced to abandon its money supply targets in favour of an exchange rate target with the result that inflation surged. Current exchange rate developments have not until today at any rate made any such measures by the National Bank necessary he said.
SWISS PREPARED TO INCREASE CURRENCY INTERVENTION