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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