By John Revill and Brenna Hughes Neghaiwi
ZURICH (Reuters) – Swiss monetary policy must remain accommodative, Swiss National Bank Chairman Thomas Jordan said on Wednesday, saying the central bank was currently willing to intervene more strongly in currency markets.
Using negative interest rates and foreign currency purchases is particularly important with the Swiss franc in high demand as a safe-haven investment during the coronavirus pandemic, Jordan told a virtual event in Zurich.
“We have no signal that the Swiss franc is anything other than highly valued,” Jordan told the event, which was organised by Swiss bank UBS
The Swiss National Bank has been increasing its foreign currency purchases this year to relieve pressure on the Swiss franc, which has risen to its highest level in nearly five years against the euro.
The higher value of the franc damages the SNB’s goal of price stability by pushing down prices and hurts Swiss exporters.
As a result of its interventions, the SNB’s foreign currency holdings have ballooned to 800 billion Swiss francs ($825.59 billion), bigger than the output of entire Swiss economy, raising concerns about exposing the central bank to massive losses.
The central bank’s balance sheet could be expanded further, Jordan said, after weighing up the costs and benefits. The bank could also cut its negative rates from the current level of minus 0.75%, the lowest in the world.
“We have a big balance sheet, this is true,” Jordan said. “As long as the benefits are bigger than the costs, we should expand the balance sheet,” he said.
“We have room… to cut rates further if necessary. At this moment -0.75% is the right level for money market rates.”
(Reporting by John Revill; editing by Brenna Hughes Neghaiwi)
