January 22, 2010 / 4:41 PM / in 8 years

UPDATE 1-SNB head: higher rates inappropriate for now-WSJ

 * Moderately optimistic on economy but lots of uncertainty
 * Will resolutely prevent excessive rise in franc
 * Residual deflation risks continue
 
 (Adds more comments on monetary policy, regulation, currency)
 By Sam Cage
 ZURICH, Jan 22 (Reuters) - Raising interest rates would be
inappropriate for the moment and the Swiss National Bank will
continue to prevent any excessive rise in the Swiss franc, the
head of the central bank was quoted as saying on Friday.
 The SNB has a moderately optimistic outlook for the Swiss
economy but plenty of uncertainties remain, meaning it would be
premature to start tightening monetary policy at the moment, the
Wall Street Journal quoted SNB Chairman Philipp Hildebrand on
Friday as saying.
 "What we do know is that at the moment certainly raising
interest rates would be inappropriate," Hildebrand said. "Our
policy is clear: we will resolutely prevent an excessive
appreciation as long as there are deflationary risks."
 Switzerland emerged from recession in the third quarter of
last year, and the SNB forecasts growth of 0.5 to 1.0 percent
for 2010 and inflation of 0.5 percent.
 Keeping the franc from appreciating against the euro is one
way the central bank can stave off deflationary pressures.
 The SNB relaxed its intervention policy, launched in March
2009 to prevent a rise in the franc as part of a package of
drastic measures to fight a deep recession and deflation risks,
at its Dec. 10 meeting.
 The franc fell after Hildebrand's comments and was down 0.2
percent against the euro compared with Thursday's New York close
at 1.4709 per euro. EURCHF=
  "We continue to have considerable residual deflation risks,
particularly in the event that we were to be hit by a renewed
shock of some sort, and clearly the exchange rate shock would be
one that would be particularly damaging regarding deflation
risks," Hildebrand said. 
 "We are equally committed to preventing deflation as we are
to preventing inflation," he said. "We have used the interest
rate mechanism all the way. We are obviously at a zero rate
policy."
 (Editing by Andy Bruce)

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