* SNB seeking to ensure enough liquidity in financial system
* SNB’s Jordan says measures are needed from fiscal side
* Central bank expects GDP contraction in 2020 (Recasts with SNB chairman comments)
By John Revill
ZURICH, March 19 (Reuters) - The Swiss National Bank is working closely with the government to cushion the economic impact of the coronavirus epidemic, it said on Thursday, stressing that monetary policy alone cannot fight the economic downturn caused by the outbreak.
The outlook for the Swiss economy has worsened considerably, with the safe-haven Swiss franc becoming “even more highly valued”, the SNB said as it kept its ultra-expansive monetary policy in place.
The central bank slashed its growth forecast for 2020, now seeing the Swiss economy contracting. It had earlier expected growth of 1.5% to 2%.
“In Switzerland, the economy in large part is not active,” SNB Chairman Thomas Jordan told reporters.
“The shops are closed, people are being sent home - all these measures are necessary to fight the virus and get over the epidemic, but they lead to a reduction in economic activity.”
The SNB is stepping up currency interventions to curb the franc’s rise and trying to ensure the financial sector has enough liquidity. But these steps can only play a supporting role.
“The key measures do not come from central banks, but from medical measures and also from the fiscal side,” Jordan said.
“”We have to provide the financial system with enough liquidity to ensure the credit flow to the economy does not dry up ... so firms can survive this very difficult situation.”
The government, central bank and market supervisor are readying an aid package worth 40 billion to 100 billion Swiss francs ($103.33 billion) to help the economy deal with the fallout, the newspaper Tages-Anzeiger reported.
The government, which has promised more steps by Friday, has already announced an aid package worth 10 billion francs, mostly for workers on short hours because of the spread of the virus. More than 3,000 people have been infected and at least 21 have died in Switzerland.
Jordan gave no details but appeared to rule out “helicopter money” - where free money is handed out to households to stimulate spending.
The SNB this week joined global action with the U.S. Federal Reserve and four other central banks to step up provision of dollar liquidity amid a market scramble for funds.
An SNB auction of dollar liquidity on Wednesday saw banks use the facility for the first time since 2012.
Cutting interest rates would not help the situation in Switzerland, Jordan said.
The central bank already has the world’s lowest interest rate, minus 0.75%, which it maintained on Thursday. It also kept the rate of -0.75% on overnight deposits it holds for commercial banks, as expected.
The SNB reduced the pain for banks, raising the exemption threshold before negative interest rates applied to 30 times banks’ minimum requirements from 25 times.
This would save banks around 600 million francs per year, Jordan said. (Reporting by John Revill; editing by Michael Shields, Larry King)