GENEVA (AP) -- Switzerland's economy will continue to grow this year but faces risks from the recession in the euro area, its biggest trading partner, the hesitant U.S. recovery and weakening Chinese growth, the president of the Swiss National Bank said Thursday.
Thomas Jordan also said the value of the Swiss franc remains high and the central bank would defend the currency "if necessary, by buying foreign currency in unlimited quantities." In September 2011, the Swiss National Bank imposed a ceiling on the value of the franc of 1.20 francs per euro.
He said the exchange rate policy had helped avert "an undesirable tightening of monetary conditions" from an appreciation in the franc — a higher currency makes exports more expensive and could hurt economic growth.
The ceiling was put in place after the franc, a popular safe haven asset for investors, rose to near-parity with the euro. Without it, there would have a severe recession, the bank said.
In an annual assessment of the nation's banks, which are crucial to the Swiss economy, the bank also welcomed the efforts by the two biggest banks, UBS AG and Credit Suisse, to raise their capital cushion to conform to new regulatory levels. However, he said current leverage ratios — a measure widely-used in financial circles to indicate a bank's ability to meet its obligations — are still too low.
Jordan told a news conference in the capital Bern that the target range for the bank's benchmark interest rate will be left unchanged at 0-0.25 percent — in line with the U.S. Federal Reserve. However, he cautioned that exceptionally low interest rates in the Alpine nation have the potential to create imbalances in the mortgage and real estate markets.
He added that Switzerland can still grow 1-1.5 percent this year despite a weakening in the second quarter.
"The risks for the Swiss economy remain high," he said. "They continue to originate, for the most part, from the international environment. A weakening in the global economic momentum cannot be excluded. Further developments in the euro area financial and sovereign debt crisis remain uncertain. Tensions can reappear at any moment on global financial markets."