SNB Chairman Says Rates Could Go Deeper into Negative Territory

The Swiss National Bank could push interest rates deeper into negative territory, Chairman Thomas Jordan said in a magazine interview, warning that turmoil in Europe could revive the franc’s traditional role as a safe-haven currency.

Asked whether the SNB could lower rates further, Jordan told Swiss magazine Bilanz: “We have gone relatively far with the negative interest rates. At present we are monitoring the situation closely. We do not rule out anything.”

Just over a year ago, Switzerland’s central bank shocked financial markets by abandoning a cap of 1.20 francs per euro it had defended for three years to shield the export-oriented economy from the pain of an overvalued currency.

In December 2014 the SNB introduced negative interest rates in an effort to make the safe-haven franc less attractive. It now charges 0.75 percent for some bank deposits at the SNB and also aims to keep three-month LIBOR rates around -0.75 percent.

The SNB’s policy aims to weaken the franc, Jordan said in the interview published on Thursday. “For this purpose, we have negative interest rates and we are ready to intervene in the forex market.”

The euro plunged against the franc when the cap was removed but has recovered this year to over 1.11 francs. It gained on Jordan’s comments to trade around 1.0970 at midday.

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