In Jordan, SNB plans new interventions if needed

WASHINGTON (Reuters) – Swiss monetary policy is appropriate for the moment, but policymakers still have the option of further lowering already negative interest rates or resorting to other policies if needed, said Saturday the president of the National Bank, Thomas Jordan.

"There is no reason to change monetary policy", given the bank's declining inflation expectations and risk of overheating the country's economy, Jordan said at a press conference held Saturday in Washington, on the sidelines of the Monetary Council and the World Bank Board.

But Jordan said the central bank still had a lot to do if conditions warranted it.

"We always insist on the fact that we can still lower interest rates and that we can also use the balance sheet, if necessary, to intervene in foreign exchange markets. Both instruments are there to be used depending on the situation. "

Central banks have been cautiously awaiting the resolution of a large number of potential threats to growth, including US-China trade negotiations and the global economic slowdown in Europe.

The IMF said earlier this month that Switzerland's economic growth is expected to slow to 1.1 percent in 2019 before a "moderate" recovery in 2020, evoking these risks.

The Swiss central bank has maintained a particularly flexible policy using negative interest rates of 0.75%. This means that it charges the commercial banks the cash they hold beyond a certain limit and that it is one of the tools of the central bank to combat the rise of the Swiss franc and maintain the stability of the price in the country.

He also intervened on the foreign exchange markets to stem the rise of the hut, which had reached its highest level in 20 months in recent weeks against the euro, creating discomfort for an economy focused on exports.

Since then, the currency has made some recent gains, but Jordan on Saturday called the franc "still highly appreciated".

Negative interest rates, for their part, have been criticized by banks for reducing their yields. Jordan said the Swiss central bank had taken into account the effects of negative rates on banks when drawing up its policy. He said the profits of the banking system have been relatively stable.

"The system was designed to reduce the pressure on the banks from the start" by exempting some banks' reserves from the cost of keeping their money with the central bank. But Jordan said it was important to keep an eye on the risks of a world where many central banks set low or negative interest rates.

European Central Bank President Mario Draghi said this week that his central bank would consider whether the preservation of its own negative interest rate regime could have secondary effects on the bank's willingness and ability to lend.