May 8 (Bloomberg) -- The Swiss National Bank’s cap on the franc is still necessary and the central bank has to use other measures to control Switzerland’s booming property market, said Vice President Jean-Pierre Danthine.
“The minimum exchange rate remains indispensable,” Danthine said at a conference in Lausanne, Switzerland today. “We don’t have the option of using interest rates” to correct developments in the property market, he said. “We use other measures.”
Switzerland is in the midst of its strongest housing boom in two decades, fueled in part by the SNB’s loose monetary policy that has made taking on debt inexpensive. In a bid to thwart risky lending, the government in February ordered banks to hold additional capital as a buffer. The measure, implemented at the behest of the SNB, takes effect from Sept. 30.
The central bank has held its benchmark interest rate at zero since August 2011 and in September of that year capped the franc at 1.20 per euro to shield the economy from the crisis in the neighboring euro region.
“The rising dynamic of the real-estate market and of mortgage lending cannot continue indefinitely,” Danthine said.
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