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ZURICH (Reuters) – The Swiss National Bank could ease its monetary policy, which is already very expansive, if necessary, and bring interest rates even more negatively, said President Thomas Jordan.
The SNB currently applies an interest rate of -0.75% on the cash it holds above a certain threshold for commercial banks, which is one of the cornerstones of its policy to curb the rise of the Franc refuge.
The central bank could further reduce its interest rate or increase its foreign exchange purchases if needed, Jordan told Blick newspaper in an interview published on Saturday.
"We still have the opportunity to further reduce negative interest rates," he told the Swiss newspaper, recalling the remarks made at the meeting of the International Monetary Fund in Washington last week.
"We have already gone a long way, but there is still a possibility and we can, if necessary, further expand our balance sheet with interventions."
But the SNB would wonder if other actions were worth it before taking action, said Jordan.
Banks have criticized negative interest rates for reducing their yields, while the SNB's foreign currency holdings of 755 billion Swiss francs (£ 573.12 billion), subject to significant differences between profit and loss.
"If we are convinced that it is necessary to fulfill our mandate, we are of course ready to use the monetary policy instruments," he said.
Jordan said the current SNB strategy was appropriate because the Swiss remained "highly valued", although the situation has improved over the last three years.
The Swiss economy has been able to adapt to the high value of the currency, while the higher inflation rates observed in other countries have helped to preserve the competitiveness of Swiss products.
"Inflation has been higher abroad and the real exchange rate is no longer the same as in 2015," Jordan said.
($ 1 = 1.0137 Swiss francs)
(Report by John Revill, edited by David Evans)
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