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Financials

UPDATE 1-SNB's Maechler defends negative interest rates against pension fund fears

(Adds more comment, detail, background)

LAUSANNE, Switzerland, April 3 (Reuters) - The Swiss National Bank is aware of the problems negative interest rates are causing for pension funds, but remains committed to the measure it is using to curb demand for the highly valued Swiss franc, governing board member Andrea Maechler said on Wednesday.

The SNB had to look at the Swiss economy as a whole, and a sharp increase in interest rates to satisfy pension funds could cause problems for the rest of the country’s economy, she said.

The impact of negative rates “is something we are very conscious of,” she told a real estate conference hosted by the Banque Cantonale de Vaud in Lausanne.

“I can assure you that this is something we look at when we consider the advantages of our monetary policy and the disadvantages,” she said.

As part of its policy, the SNB charges a negative interest rate of -0.75 percent on cash it holds for commercial banks.

“That reduces the attraction of coming and investing in Swiss franc assets,” Maechler said.

Maechler reiterated that the SNB’s monetary policy was based on its negative interest rates and its willingness to intervene to deter speculative investment flows into the safe-haven franc.

The currency has recently reached its highest level since the summer of 2018 as investors have sought a safe-haven amid gloomier outlooks for the global economy.

The SNB has consistently described the franc as “highly valued,” - a situation Maechler said she had heard about personally.

“I travel a lot and speak to various stakeholders in the real estate markets - and the franc is seen as an expensive currency,” she said.

A side effect of low interest rates was they had prompted an escalation in Swiss property prices, with Maechler saying she saw large imbalances and a risk of a price correction.

“Prices are going up, the vacant property rate is going up, that creates a certain amount of vulnerability for a correction of prices,” she said.

Asked about the role that central bankers had played in global economic growth in the past decade, she said it was not possible for monetary policy to be “the only game in town” and said fiscal policy must play a role. (Reporting by Tom Miles, editing by John Revill)

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