The Swiss National Bank (SNB) made some bold decisions overnight. It scrapped the Swiss exchange rate ceiling and cut interest rates. The currency then appreciated by nearly 40%. It has since come down, but if you were holding some Swiss francs, you've had a good 24 hours.

Whether the SNB misjudged markets or not, and whether this was the right decision, is not something I want to address. What I want to address are the complaints that this damages the SNB's credibility.

The complaint is that senior members of the SNB claimed as recently as last Monday that they were committed to the ceiling. But what on earth were they supposed to do? Had they given the smallest hint that they were contemplating lifting the ceiling, every man and his dog would be turning up to the SNB to exchange euros, dollars, yen, or anything else they could get their hands on into francs. Then those traders could just sit back and enjoy windfall profits as the ceiling was lifted, at the expense of the Swiss taxpayer.

The fact is, when you have a fixed exchange rate, movements have to be made without warning. Market participants should know that. Perhaps some are sour they missed out on a 40% return over a few hours.

Photo by Flickr user davidpc.