ZURICH (Reuters) – The Swiss National Bank could loosen its already ultra expansive monetary policy if necessary and take interest rates even further into negative territory, Chairman Thomas Jordan said.
The SNB currently charges an interest rate of -0.75 percent on cash it holds for commercial banks above a certain level, one of the cornerstones of its policy to check the rise of the safe-haven franc.
The central bank could cut the interest rate further, or increase its foreign currency purchases if need be, Jordan told newspaper Blick in an interview to be published on Saturday.
“We always have the possibility to further cut the negative interest rates,” he told the Swiss newspaper, repeating comments he made at the International Monetary Fund meeting in Washington last week.
“We have already gone very far, but there is still the possibility. And we can also, when necessary, further expand our balance sheet with interventions.”
But the SNB would weigh up whether further action was worthwhile before acting, Jordan said.
Negative interest rates have come under fire from banks for reducing their returns, while the SNB’s 755 billion Swiss francs (£573.12 billion) in foreign currency holdings make it subject to big swings between profit and loss.
“If we are convinced it is necessary to fulfil our mandate, then of course we are ready to use the monetary policy instruments,” he said.
Jordan said the SNB’s current strategy was appropriate because the franc remained “highly valued”, although the situation had improved over the last three years.
The Swiss economy had been able to adjust to the currency’s high value, while higher inflation rates in other countries had helped to preserve the competitiveness of Swiss products.
“Inflation has been higher abroad, so the real exchange rate is no longer the same as it was in 2015,” Jordan said.
($1 = 1.0137 Swiss francs)
(Reporting by John Revill; editing by David Evans)