Negative Rates not Off the Table for Swiss Central Bank

The Swiss National Bank does not rule out the use of negative interest rates to defend its cap on the Swiss franc and ward off deflation, Chairman Thomas Jordan said on Monday.

The central bank imposed a ceiling on the value of the franc in September 2011, after investors fleeing the euro zone crisis bid the safe-haven currency up to record levels, threatening to snuff out inflation.

Jordan reiterated the SNB’s quarterly statement of Sept. 18, which he was presenting at a news conference in Geneva, and said the central bank was ready to take additional action immediately, if necessary, to defend its lid on the franc at 1.20 per euro.

 
“There is no measure that is excluded, a whole series of measures are discussed,” Jordan said. “Recently there has been a discussion of negative rates in the news. These are also not excluded.”

Jordan cautioned the risks of deflation have grown in Switzerland, citing the SNB’s 2016 inflation forecast of 0.5 percent, even with rates at zero for the next three years.

“As a result, the risk of deflation increases,” Jordan said.

Jordan repeated the central bank has not had to intervene in foreign exchange markets to defend the cap since September 2012.

via Reuters

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza