(Bloomberg) --
Swiss National Bank President Thomas Jordan rebuffed calls to scrap negative interest rates, saying they were “essential” and that the economy would be in worse shape without them.
In the absence of a sub-zero policy benchmark, “the franc would be even more attractive and would appreciate,” he said in a speech in Bern on Thursday. “That would greatly slow down Switzerland's economy and cause unemployment to rise substantially -- which, in turn, would have a detrimental impact on the pension system.”
The SNB's deposit rate has been at -0.75% for almost five years, part of a trend toward ultra-low rates evident across industrialized economies. Although they're meant to stimulate growth and inflation, the financial sector blames them for hurting the bottom line.
Credit Suisse Group AG CEO Tidjane Thiam said earlier this week negative rates were “something that will have to change at some point to really get the sector back on track.”
Jordan said that while central bank policies had contributed to the low global interest rate environment, other factors such as higher savings rates or changes to inflation expectations were also at play.
“We will only maintain the negative interest rate for as long as the benefits outweigh the costs,” Jordan said.
To contact the reporter on this story: Catherine Bosley in Zurich at cbosley1@bloomberg.net
To contact the editors responsible for this story: Fergal O'Brien at fobrien@bloomberg.net, Zoe Schneeweiss
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