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IMF: Swiss National Bank should pursue rate cut, instead of currency interventions

The International Monetary Fund suggested that theSchweizerischeNationalbank limit its monetary policy intervention to interestrates, calling for a moderate rate cut, Bloomberg News reported Sept. 26.

Regarding the Swiss central bank's foreign currencypurchases, which it has been making to stabilize the franc in the wake of the Brexitvote, IMF Mission Chief Rachel van Elkan said at a press conference in Bernthat such currency interventions should be used only for "sudden, largeexchange rate appreciations."

"This is very much choosing between two instruments andfinding the right middle ground," van Elkan said. "And we think atthe moment there's a bit more space on the interest rate."

The central bank's deposit rate is negative 0.75%.

In response, SNB alternate governing board member ThomasMoser said that the central bank is comfortable with the current policyarrangement, pointing out that steeper negative rates could lead to a hoardingof cash by investors, while acknowledging that potential losses grow as thebalance sheet grows.