ZURICH (Reuters) - The Swiss National Bank sees no reason to alter its ultra-loose monetary stance, especially as political risks have increased, SNB Vice-Chairman Fritz Zurbruegg told Swiss broadcaster SRF in an interview to be shown on Monday.
The central bank last month kept its policy of negative interest rates and a readiness to intervene in the currency markets to curb the strength of the Swiss franc.
With a relatively buoyant Swiss economy — forecast by the SNB to grow to around 1.5 percent this year after an above-average 2.5 percent in 2018 — and spiraling property prices, critics say the central bank can consider normalizing policy.
But Zurbruegg said he saw no need to change course from the path which he said had stabilized prices and helped Switzerland navigate the global financial crisis better than expected.
“There is no reason to change our monetary policy,” he told the program ECO. “We still need negative interest rates and a readiness to intervene in the currency markets.
“Only with these can we fulfil our mandate and guarantee price stability.”
Many analysts expect the SNB to wait for the European Central Bank to start hiking rates before acting itself. An earlier hike by the SNB risked triggering a strengthening of the franc, whose high value weighs on Switzerland’s export-reliant economy.
Price pressure remains low and Switzerland’s economy has developed well “but the uncertainties have increased”, Zurbruegg said.
“At the same time the franc is still highly valued. The markets are fragile. For us it is clear, at present the expansive monetary policy is the right policy.”
How long to keep rates negative - designed to reduce upward pressure on the franc by making investments less attractive - depended on developments during 2019, Zurbruegg said.
“We have a relatively positive development in the world, but over Christmas there was also a certain gloom,” said Zurbruegg, who sets policy along with SNB Chairman Thomas Jordan and Governing Board member Andrea Maechler.
“Political risks have increased, and there remains the danger of an escalation in protectionism. That is not good for economic development.”
The SNB still had the right tools to deal with any new crisis, despite already deploying unconventional instruments like negative rates and expanding its balance sheet to a size bigger than the Swiss economy, he added.
“It’s true, our balance sheet is very large, but it can still grow. And we have the interest rates, which we can still move.”
Reporting by John Revill; Editing by Michael Shields