SNB’s Jordan Sees Room for Lower Rates, NZZ am Sonntag Says

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(Bloomberg) --

Swiss National Bank President Thomas Jordan reiterated that he sees further room to cut interest rates and warned that the franc would rise quickly if the central bank abandoned its negative rates and stopped interventions in foreign exchange markets, according to an interview with NZZ am Sonntag published on Sunday.

“The franc is still highly valued,” Jordan told the newspaper. “There isn’t an extreme overvaluation as in the past. This is thanks to our monetary policy: if we abandoned negative rates and interventions in currency markets the valuation of the franc would change rapidly.”

Jordan also said that while its room for maneuver on interest rates, currently at -0.75%, wasn’t unlimited, “further cuts are certainly possible” and a “further loosening of monetary policy may become necessary under certain circumstances.”

Asked if a further cut in rates could be counterproductive because it may prompt savers to withdraw cash from banks and store it at home, Jordan said the costs and risks of storing large sums still outweighed those of negative rates. “This is why we believe there is still room for maneuver.”

Responding to criticism from banks that the low-rate policy was missing its target, he said the SNB’s policy stance was the right one for the current economic environment. “We have never denied that there are side effects.” If the SNB were to raise rates, the franc would appreciate and unemployment would rise, he said.

Credit Suisse Group AG CEO Tidjane Thiam said earlier this week negative rates were “something that will have to change at some point to really get the sector back on track.”

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