Swiss National Bank not ruling out negative rates

GMT 15:15 2014 Monday ,29 September

Arab Today, arab today Swiss National Bank not ruling out negative rates

Swiss National Bank
Geneva - AFP

Swiss National Bank chief Thomas Jordan on Monday said he did not rule out using negative interest rates to ward off the spectre of deflation.
"We want to avoid deflation, and there are a number of potential measures. Nothing's ruled out, notably negative rates," Jordan told reporters at the Geneva Press Club.
Negative interest rates are a measure that encourages savers to withdraw and spend their money, rather than racking up costs by leaving it in the bank.
Deflation, or a repeated fall in prices, is seen as a risk because it can encourage would-be purchasers to hold off spending in order to pay less later, thereby slowing the pace of an economy.
Jordan said that deflation risks were on the rise.
"Developments in the global economy have not been as good as expected. Inflation has been very weak, and the risk of deflation is rising," he underlined.
The bank has forecast annual inflation this year will be just 0.1 percent.
Jordan also said that "nothing has been ruled out" regarding a new minimum exchange rate for the Swiss franc with the euro.
With the strong franc and high labour costs making it hard to beat rivals on price, Switzerland's firms have long made quality their selling point.
But as the Swiss currency gained ever more clout against the embattled euro, in September 2011 the bank set a floor rate of 1.20 francs to the euro, in an effort to protect exporters.
Since then, the bank has intervened whenever necessary to protect the rate, by buying up euros.
In 2011, it spend 11 billion francs doing so, and another 188 billion francs between May and September 2012, at the height of the eurozone crisis.
Jordan also reiterated that the bank had earlier this month cut its economic growth forecasts.
It estimates that Switzerland's gross domestic product will grow by 1.5 percent this year, down from the 2.0 percent it forecast in June.
Inflation, meanwhile, is expected to rise only narrowly from this year's 0.1 percent to 0.2 percent in 2015 and 0.5 percent in 2016.


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