* SNB vice chairman says low rates not sustainable
* Markets don't expect hike at quarterly meeting on March 17
* September hike fully priced in, bets for June move rise
(Adds comments, background)
ZURICH, March 4 The Swiss National Bank will have to raise interest rates in the mid-term to ensure price stability, a Swiss policy maker said on Friday, strengthening the view that the first post-crisis Swiss rate hike is not too far away.
Markets are pricing in earlier monetary policy tightening on signs that the already strong Swiss economy is picking up further speed together with European Central Bank President Jean-Claude Trichet's comment that the ECB is close to raising borrowing costs. [ID:nLDE720086]
A September move by the SNB is now fully priced in and expectations of a rise in June are increasing. <0#FES:>
"It is clear that this low interest rate level is not sustainable in the medium and long term because keeping it at this level would increase the risk that price stability cannot be ensured," Jordan told Swiss newspaper Le Temps.
The Swiss franc jumped against the euro on Jordan's comments after the currency had dropped sharply on Thursday after Trichet said euro zone rates could rise as early as April.
The SNB is widely expected to hold rates steady at its quarterly meeting on March 17 meeting because inflation is very low and higher rates would boost the franc, which is still trading not too far off record highs against the euro and the dollar.
"Following the ECB's signal that it is likely to raise rates next month, we are reviewing our Q3 call for the first hike in Switzerland," BNP Paribas analyst Eoin O'Callaghan said in a note.
Citigroup analyst Michael Saunders also said a June hike had become more likely.
"With other European central banks now tilting towards tightening, the SNB's worries that higher Swiss rates will cause excessive franc appreciation may now become less critical," he said.
In the newspaper interview, Jordan also said the central bank still had a close eye on the Swiss housing and mortgage market. While the situation had not become more critical recently, warning signals had not disappeared, he said.
The central bank warned in the past that low interest rates may tempt banks to loosen their lending standards and trigger a a house price bubble, pointing to some regions of the country where soaring house prices were a concern. (Reporting by Sven Egenter; Editing by Hugh Lawson)