SNB's Jordan Says Interest Rate Cuts, More Currency Intervention Possible

Swiss National Bank Chairman Thomas Jordan on Friday left the door open to cutting interest rates more deeply into negative territory and intervening in markets to weaken the Swiss franc, as he said the central bank "continues to face major challenges."

"We are experiencing an unusually long period filled with difficult tasks and decisions," Mr. Jordan said in prepared remarks to the SNB's annual shareholders' meeting. "If necessary, we can lower the negative interest rate further or buy additional foreign currency," he said.

The SNB has one of the lowest policy rates in the world, with a minus-0.75% rate on deposits stored at the SNB that are above a certain threshold. It has also purchased vast quantities of foreign stocks and bonds to weaken the franc. This has pushed the SNB's foreign currency reserves to 683 billion Swiss francs ($686 billion), an amount roughly equal to Switzerland's entire gross domestic product.

Still, the franc remains "significantly overvalued," Mr. Jordan said. "Without the negative interest rate and our willingness to intervene, the Swiss franc would be even stronger, inflation would fall once again, and unemployment would rise," he said.

One particular challenge for Swiss policy makers is that the franc is often influenced by conditions outside the SNB's control. The franc is considered one of the world's safest currencies, so it typically strengthens in times of global uncertainty.

The euro fetched 1.0817 francs early Friday. Though the euro--the currency of Switzerland's main trading partner, the eurozone--has strengthened a bit against the franc in recent days, the eurozone currency remains about 10% weaker than when the SNB maintained a cap on the franc's value from 2011 until early 2015.

Yet the franc's strength hasn't derailed Switzerland's export-dependent economy. Swiss GDP grew 1.3% last year after expanding 0.8% in 2015. The SNB expects 1.5% growth this year.

"Global economic sentiment is really quite positive. Nonetheless, significant political uncertainties remain," Mr. Jordan said, citing the coming French elections, uncertainty over Brexit and questions "concerning the new U.S. administration's future economic and trading policy."

Mr. Jordan's appearance Friday before SNB shareholders is unusual in the world of central banking. The SNB is one of the few central banks with listed shares, though private investors have a minority of voting shares and thus are unable to influence the bank's policy-making decisions.

The thinly-traded SNB shares have rallied in the past year as the stock emerged as an attractive alternative to other safe assets like government bonds that carry a negative yield in Switzerland. The SNB ran a 7.9 billion franc profit in the first quarter, after posting a 24.5 billion-franc profit last year.

SNB shares rose 8% on Thursday to 1,899 francs, and have risen nearly 70% in the past year.

Write to Brian Blackstone at

(END) Dow Jones Newswires

April 28, 2017 04:14 ET (08:14 GMT)