ZURICH, May 25 (Reuters) - Swiss National Bank Chairman Thomas Jordan sees no reason to change the bank’s ultra-loose monetary policy, he said in a TV interview, describing the central bank’s use of the world’s lowest interest rates as “absolutely necessary”.
“We really don’t have any reason right now to change monetary policy,” he told TeleZurich’s TalkTaeglich programme.
“Our monetary policy is appropriate because we still have very low inflation, the franc is very strong and that tends to put pressure on inflation,” Jordan said in the interview to be broadcast on Tuesday.
Since 2015 the SNB has charged an interest rate of minus 0.75% on the overnight deposits of commercial banks, and intervened in currency markets to keep a lid on the value of the safe-haven Swiss franc.
During 2020 the central bank spent 110 billion Swiss francs ($122.86 billion) on foreign currencies to rein in the franc, which surged in value during the first months of the coronavirus pandemic.
Although Swiss inflation had recently turned positive, the risk from rapidly rising prices remained small, Jordan said, adding now was not the time to start hiking rates.
There was no economic overheating, with production capacities in Switzerland and the country’s labour market still having some slack, meaning inflation would likely remain moderate.
“In the current environment, we can’t do without them (negative rates),” he said. “They are absolutely necessary.”
“You have to think...what would happen if the SNB were to raise interest rates now? Then we would have a much stronger franc, we would have negative inflation, and I don’t think that would benefit anyone.”
$1 = 0.8953 Swiss francs Reporting by John Revill; Editing by Michael Shields
Our Standards: The Thomson Reuters Trust Principles.