Maechler Says Banks Tell SNB Negative Rates Are Working

  • Franc still overvalued, though less of a haven: Maechler
  • SNB governing board member gives interview with Le Temps

The Swiss National Bank can see that its record-low deposit rate is weakening the franc, with the economy experiencing net capital outflows, Governing Board Member Andrea Maechler said.

“It’s difficult to quantify their effect, but it’s there,” Maechler, who joined the SNB’s rate-setting committee last year, told newspaper Le Temps in an interview. “It’s visible in the market and banks confirm it to us.”

In a bid to weaken the franc against the euro, the SNB announced a deposit rate of minus 0.75 percent in January 2015, with a pledge to intervene in currency markets the other element of its two-pronged strategy.

Maechler confirmed that stance in the interview, saying the franc was still overvalued. “But today, the franc is less of a haven than it once was,” she said. Capital flows “aren’t directed to Switzerland but more to Japan.”

There were net outflows of private capital from Switzerland in the second and third quarter of 2015, according to Maechler. Fourth-quarter data has yet to be published.

The SNB’s foreign exchange reserves, which have ballooned as a result of interventions to weaken the franc, dipped to 571 billion francs ($572 billion) in February, according to data released on the central bank’s website on Monday.

The SNB’s base scenario is one for a gradual pick up of global growth, Maechler said, though clearly risks have increased since December and policy makers haven’t let down their guard.

“The eventuality of a Brexit, for example, raises questions,” she said. “What will be its effect on the franc? That’s one of the unknowns we have to take into account.”

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