The Swiss National Bank is in no hurry to change its ultra-loose monetary policy based on negative interest rates, Chairman Thomas Jordan said after the Swiss franc hit its weakest level in over three years.
“We still have a relatively fragile situation, it can change from one day to the other, so we remain very prudent at this point,” Jordan told Bloomberg TV in Washington on Thursday, Reuters reported.
“It’s not the time today to talk about changing monetary policy. We are convinced that the current monetary policy is still necessary,” he said.
The franc fell below the symbolic level of 1.20 against the euro on Thursday as a revival in risk appetite encouraged investors to use it to buy higher yielding assets elsewhere, betting on loose monetary policy keeping the currency weak.
The franc dropped past the level defended by the SNB for three years until January 2015 when the SNB abandoned a cap and it suddenly surged. Since then the SNB has deployed a mixture of negative interest rates and foreign currency purchases to weaken franc’s demand, which is traditionally sought by investors in times of economic and political turbulence.
Jordan said the franc was now moving in the “right direction” after a period of significant over-valuation, although the situation remained fragile and could change at any point. The franc remained a safe haven, although demand had lessened, he added.
“It is still a safe haven, but sometimes the demand for safe havens is smaller,” he said in the interview. “Sometimes demand for other safe havens occurs.”
Early steps by the European Central Bank to normalize its own stimulus policy were welcome, he added, but this would not necessarily trigger a response from the SNB.
Inflation remained very low in Switzerland, while there remained a gap between current and potential economic output.
