BERN, April 28 (Reuters) - The Swiss National Bank could cut rates deeper into negative territory and step up currency market interventions if necessary to pursue its ultra-loose policy and rein in the strong Swiss franc, Chairman Thomas Jordan said on Friday.
"Given low inflation and underutilisation of production capacity, maintaining an expansionary monetary policy in Switzerland is the right course of action to take. The Swiss franc is still significantly overvalued," he said in remarks prepared for the central bank's annual general meeting.
"We will continue to make the most of our monetary policy latitude in the future. If necessary, we can lower the negative interest rate further or buy additional foreign currency," he said, although the SNB would carefully weigh the costs and benefits of any move.
Jordan noted that global economic sentiment had become "really quite positive" but stressed that significant political uncertainties remained.
"Within the euro area, the French elections are currently dominating the headlines. Uncertainty persists about how Brexit will unfold. Looking across the Atlantic, there are still a number of questions concerning the new U.S. administration's future economic and trading policy," he said.
Negative interest rates and currency interventions have been the SNB's main tools for two years as it tries to tame the franc amid demand by investors for the safe-haven currency whose strength makes life hard for Switzerland's export-based economy.
SNB foreign currency purchases have swelled its foreign currency reserves to 683 billion Swiss francs ($686.50 billion), a figure larger than Swiss GDP.
The SNB's heavy currency interventions landed it on the U.S. Treasury's watch list of potential currency manipulators.
The International Monetary Fund has said the bank should make more use of negative interest rates.
The SNB charges -0.75 percent on sight deposits it holds for commercial banks, a policy which has been criticised as an increased burden for banks, pension funds and insurers.
Despite the franc's weakening versus the euro after the success of centrist Emmanuel Macron over anti-EU candidate Marine Le Pen in the first round of French presidential elections, analysts expect the SNB to remain active.
"I don't think that they will become complacent and despite Macron being the favourite now, the SNB will prepare for both outcomes: a Macron win but also a Le Pen win," said Alessandro Bee, an economist at UBS.
Jordan cited the challenges of coping with the SNB's large balance sheet and big fluctuations in its annual results.
"Occasional losses, however substantial, are not fundamentally a problem for our monetary policy. As a central bank, we could still operate even if our equity capital were to become negative for a certain period. Nevertheless, this is something we are determined to avoid," he said.
$1 = 0.9949 Swiss francs Editing by Michael Shields