The Swiss National Bank (SNB) can lower its deposit rate further to counter a “clearly overvalued” Swiss franc, SNB President Thomas Jordan said.
“There’s clearly a limit to the negative rate — the question is exactly where it is,” he told Swiss radio SRF in an interview broadcast on Saturday. “At the current level of minus-75 basis points, the limit surely isn’t reached.”
The SNB cut its interest rate on sight deposits on Jan. 15, when it abandoned the cap of 1.20 Swiss francs per euro it introduced in 2011. Jordan said policymakers acted in anticipation of the European Central Bank’s announcement of quantitative easing, which would have required ever larger interventions to defend the ceiling.
Since then, sight deposits — cash commercial banks hold with the central bank — have risen, a sign the SNB might have sold francs.
“We look at the foreign exchange market situation as a whole, and should there be a need, we’re active — but we can’t speak about our transactions,” Jordan said.
Asked whether Switzerland would enact a form of capital controls, he said “it’s not a measure that is at the forefront at the moment.”
With the franc having appreciated almost 16 percent against the euro, and 8 percent against the US dollar last month, Swiss economic growth is set to lose pace. The SNB’s most recent forecast, issued in December last year when the cap was still in place, was for growth of about 2 percent this year.
“At the moment, it is still hard to gauge how big the slowdown of growth will be,” he said.
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