| BERN, April 28
BERN, April 28 The Swiss National Bank could cut
rates deeper into negative territory and step up currency market
interventions if necessary to pursue its ultra-loose policy and
rein in the strong Swiss franc, Chairman Thomas Jordan said on
"Given low inflation and underutilisation of production
capacity, maintaining an expansionary monetary policy in
Switzerland is the right course of action to take. The Swiss
franc is still significantly overvalued," he said in remarks
prepared for the central bank's annual general meeting.
"We will continue to make the most of our monetary policy
latitude in the future. If necessary, we can lower the negative
interest rate further or buy additional foreign currency," he
said, although the SNB would carefully weigh the costs and
benefits of any move.
Jordan noted that global economic sentiment had become
"really quite positive" but stressed that significant political
"Within the euro area, the French elections are currently
dominating the headlines. Uncertainty persists about how Brexit
will unfold. Looking across the Atlantic, there are still a
number of questions concerning the new U.S. administration's
future economic and trading policy," he said.
Negative interest rates and currency interventions have been
the SNB's main tools for two years as it tries to tame the franc
amid demand by investors for the safe-haven currency whose
strength makes life hard for Switzerland's export-based economy.
SNB foreign currency purchases have swelled its foreign
currency reserves to 683 billion Swiss francs ($686.50 billion),
a figure larger than Swiss GDP.
The SNB's heavy currency interventions landed it on the U.S.
Treasury's watch list of potential currency manipulators.
The International Monetary Fund has said the bank should
make more use of negative interest rates.
The SNB charges -0.75 percent on sight deposits it holds
for commercial banks, a policy which has been criticised as an
increased burden for banks, pension funds and insurers.
Despite the franc's weakening versus the euro
after the success of centrist Emmanuel Macron over anti-EU
candidate Marine Le Pen in the first round of French
presidential elections, analysts expect the SNB to remain
"I don't think that they will become complacent and despite
Macron being the favourite now, the SNB will prepare for both
outcomes: a Macron win but also a Le Pen win," said Alessandro
Bee, an economist at UBS.
Jordan cited the challenges of coping with the SNB's large
balance sheet and big fluctuations in its annual results.
"Occasional losses, however substantial, are not
fundamentally a problem for our monetary policy. As a central
bank, we could still operate even if our equity capital were to
become negative for a certain period. Nevertheless, this is
something we are determined to avoid," he said.
($1 = 0.9949 Swiss francs)
(Editing by Michael Shields)