By Sven Egenter
BERNE, Nov 2 (Reuters) - The time for an end to the Swiss National Bank's ultra-loose monetary policy has not come yet as uncertainties about the future development of the economy were still extremely high, SNB board member Thomas Jordan said on Monday.
'Finding the right time for the exit will be very difficult but it has clearly not come yet,' Jordan said in a speech at a business event in Berne.
'The economic situation is not such that you start with the exit now,' he said. 'The uncertainty about the development of the economy is still extremely high.'
The SNB has taken a number of drastic steps to fight the risk of deflation. The central bank cut its target for the 3-month Swiss franc LIBOR to 0.25 percent, offering cash in its daily operations at rates close to zero.
The central bank has also bought corporate Swiss franc bonds and intervened to fight a rise in the Swiss franc against the euro.
Most economists expect the central bank to stick to its lose monetary policy at least until mid-2010.
A string of upbeat news out of Switzerland indicated recently that the Alpine economy is moving out of the deep recession it plunged into in mid-2008, when the demand for Swiss exports collapsed due to the global crisis.
The SNB forecasts a decline in the economy by 1.5 to 2.0 percent for 2009, which would be the deepest slump in over 30 years, and a modest recovery in 2010.
Jordan said the drastic SNB measures reflected the depth of the crisis and had to be taken back once the situation allowed, adding that the SNB's inflation forecast would be the main guideline for the timing.
The SNB's latest inflation forecast, published after its quarterly policy meeting on Sept. 17, already showed a rise of inflation above the SNB's threshold for price stability of 2 percent by 2012.
But Jordan said the forecast had to be interpreted carefully as it assumed unchanged monetary policy over the whole forecast horizon.
'We still have enough time to normalize monetary policy without a rise in inflation,' he said.
Consumer prices have been falling at their fastest pace in over 50 years year-on-year this summer and most economists predict only a modest rise in prices next year.
The SNB's policy measures had shown the intended effects, Jordan said.
'The volatility in the foreign exchange rate has come down and we had no appreciation of the franc, which is important for exporters,' he said.
The SNB's policy has also helped to keep the country out of a credit crunch. 'We had robust credit growth throughout the crisis,' he said. 'We have definitively no credit crunch.'
Jordan said the emission of franc bonds had picked up again and companies had encountered good demand for their bonds.
(Reporting by Sven Egenter) Keywords: SWISS SNB/JORDAN (sven-markus.egenter@thomsonreuters.com; +41.58.306.7351; Reuters Messaging: sven-markus.egenter.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
BERNE, Nov 2 (Reuters) - The time for an end to the Swiss National Bank's ultra-loose monetary policy has not come yet as uncertainties about the future development of the economy were still extremely high, SNB board member Thomas Jordan said on Monday.
'Finding the right time for the exit will be very difficult but it has clearly not come yet,' Jordan said in a speech at a business event in Berne.
'The economic situation is not such that you start with the exit now,' he said. 'The uncertainty about the development of the economy is still extremely high.'
The SNB has taken a number of drastic steps to fight the risk of deflation. The central bank cut its target for the 3-month Swiss franc LIBOR to 0.25 percent, offering cash in its daily operations at rates close to zero.
The central bank has also bought corporate Swiss franc bonds and intervened to fight a rise in the Swiss franc against the euro.
Most economists expect the central bank to stick to its lose monetary policy at least until mid-2010.
A string of upbeat news out of Switzerland indicated recently that the Alpine economy is moving out of the deep recession it plunged into in mid-2008, when the demand for Swiss exports collapsed due to the global crisis.
The SNB forecasts a decline in the economy by 1.5 to 2.0 percent for 2009, which would be the deepest slump in over 30 years, and a modest recovery in 2010.
Jordan said the drastic SNB measures reflected the depth of the crisis and had to be taken back once the situation allowed, adding that the SNB's inflation forecast would be the main guideline for the timing.
The SNB's latest inflation forecast, published after its quarterly policy meeting on Sept. 17, already showed a rise of inflation above the SNB's threshold for price stability of 2 percent by 2012.
But Jordan said the forecast had to be interpreted carefully as it assumed unchanged monetary policy over the whole forecast horizon.
'We still have enough time to normalize monetary policy without a rise in inflation,' he said.
Consumer prices have been falling at their fastest pace in over 50 years year-on-year this summer and most economists predict only a modest rise in prices next year.
The SNB's policy measures had shown the intended effects, Jordan said.
'The volatility in the foreign exchange rate has come down and we had no appreciation of the franc, which is important for exporters,' he said.
The SNB's policy has also helped to keep the country out of a credit crunch. 'We had robust credit growth throughout the crisis,' he said. 'We have definitively no credit crunch.'
Jordan said the emission of franc bonds had picked up again and companies had encountered good demand for their bonds.
(Reporting by Sven Egenter) Keywords: SWISS SNB/JORDAN (sven-markus.egenter@thomsonreuters.com; +41.58.306.7351; Reuters Messaging: sven-markus.egenter.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
© 2009 AFX News
