The Swiss National Bank isprepared to increase its intervention on currency markets if
the action can be properly coordinated with other central
banks, Markus Lusser, a member of the Bank's 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.
 REUTER
