Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

Swiss central banker Maechler warns against premature rate hike

Published 03/28/2018, 07:28 AM
Updated 03/28/2018, 07:31 AM
© Reuters. SNB Governing Board member Maechler gestures after a news conference in Bern

© Reuters. SNB Governing Board member Maechler gestures after a news conference in Bern

By John Revill

ZURICH (Reuters) - Swiss National Bank Governing Board member Andrea Maechler has given another hint that the central bank will stick with its expansive monetary policy, saying low Swiss inflation gave little reason for it to change direction.

Maechler warned against raising interest rates too early, a move she said could be counterproductive for inflation and the overall Swiss economy.

"If we would now end our expansive monetary policy, there would be a big risk that we would endanger the favorable development," she told Swiss newspaper Handelszeitung in an interview set for publication on Thursday.

She said Swiss inflation both this year and next remained subdued, although the risk of deflation had been removed.

The Swiss franc also remained highly valued, Maechler said, adding the currency had even strengthened in recent months mainly due to the weakening of the dollar .

The SNB has stuck to a strategy of charging negative interest rates and intervening on currency markets for more than three years as it sought to quell demand for the franc.

The policy bore fruit last year with the franc losing nearly 9 percent of its value against the euro (EURCHF=), aiding Switzerland's export-reliant economy.

Other central banks have started normalizing their policies, with the European Central Bank taking a small step in weaning the euro zone economy off its protracted stimulus by dropping a long-standing pledge to expand its bond buying if needed.

The U.S. Federal Reserve raised interest rates last week and forecast at least two more hikes for 2018.

Maechler rejected claims that the SNB was powerless and needed the ECB to start raising interest rates before the Swiss could start monetary tightening.

"That would be a distorted picture," Maechler said. "With us despite the solid growth there are still factors which dampen inflation.

"The franc is still highly valued, and in recent months it has even become stronger. Additionally the situation in the currency markets remains fragile."

The interest rate spread between Switzerland and rates abroad also remained very small, she added.

"It is hardly foreseeable that there will be a fundamental change in demand for the franc," Maechler said.

© Reuters. SNB Governing Board member Maechler gestures after a news conference in Bern

The SNB this month cut its inflation forecast to see consumer prices rising 0.6 percent this year and 0.9 percent in 2018.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.