Are you ready to pay more for your Swatch or Rolex or that bar of Swiss chocolate with an Alpine picture on the wrapper?
Prepared to see the bill rise for that Swiss skiing holiday?
The decision of the Swiss central bank to abolish the ceiling on the Swiss franc against the euro has led the franc’s value to shoot up on world markets.
If higher values are maintained, then life becomes much harder for Swiss exporters, who must either cut their profit margins or try to hike up prices.
And the tourism industry takes a heavy hit as it costs holidaymakers from abroad much more to visit Zermatt, San Moritz or wherever, none of which of course were cheap in the first place.
This morning the Swiss central bank abolished its target which was to keep the franc at a limit of 1.20 Swiss francs to the euro.
Since then the currency has shot up in volatile trading, gaining an extraordinary 39 per cent against the euro at one stage and still holding well above the pre-announcement levels at time of writing.
The Swiss move tells us something about the pressures of the deflationary world in which we are living.
The euro has been falling because of expectations that the ECB is going to have to, effectively, print money to revive prices and try to give a boost to growth.
Prices are now falling across Europe, partly due to falling oil prices but also weak economic conditions.
Our own consumer price index dropped 0.3 per cent last month, driven by falling energy prices.
If consumers and investors across Europe start to believe that this trend of falling prices will continue, it can be very dangerous economically, as spending decisions will be postponed on the basis that things will be cheaper in a few months time.
With the ECB’s policy making council due to meet next Thursday to discuss so-called quantitative easing (QE) - effectively pushing money into the euro zone system - the Swiss decided they had to move.
If not, the Swiss Central Bank feared it would have to spend billions selling Swiss francs and buying other currencies next week to offset a possible flow of funds into the Swiss currency, traditionally seen as a relatively risk free “safe haven” by investors.
The move to abolish the cap shocked the markets, who had been consistently told by the central bank that the cap was permanent.
Apart from the obvious impact on trade and tourism, the move shows just how tricky the path is for the world’s central banks as they try to deal with the fall-out of the crisis. The Swiss, for example, have solved one problem, but may now have given a big deflationary shock to their own economy.
The ECB has a big decision to make next week and the US and UK central banks are mulling when to actually increase interest rates.
All these events bring the risk of significant volatility.
Meantime, things have just got more expensive for the high rollers who will attend the Davos economic forum starting next week.
Bloomberg calculates that the price of a good whiskey in one of the plush hotels favoured by those attending rose from the equivalent of $35 last night to $41 on Thursday.
