ZURICH The Swiss government defended the central Bank's ultra-loose monetary policy on Wednesday after criticism from members of parliament following the bank's removal of its cap on the value of the Swiss franc against the euro nearly two years ago.
The franc surged against the euro EURCHF= once the cap was lifted, hitting the export-driven economy by making its goods more expensive in other countries. The SNB responded with negative interest rates and currency intervention to rein in the franc.
"The SNB's monetary policy concept has proved its worth also in difficult situations such as in the wake of the global financial crisis from 2007 to 2009," the cabinet said in a statement after a meeting.
The cabinet found the SNB had the tools it needed to fulfil its mandate of ensuring price stability while paying attention to the overall economy. The SNB can also influence the value of the franc if it considers this necessary, it added.
It saw no need to change governance at the SNB, whose monetary policy is set by a three-person governing council.
Many Swiss complain about the impact of negative rates, which hurt banks and pension funds and make life hard for savers.
But the cabinet said low rates were a global phenomenon and the SNB was keeping rates negative to reduce the appeal of franc-denominated assets.
"They are effective only if all financial market players are affected by them. Any exceptions would create a precedent which would diminish the effectiveness of monetary policy," it said.
The government saw scant opportunity to use the low-rate environment to give the economy an extra shot in the arm despite calls to refinance state debt, create a special fund to promote investment or have the SNB seek higher returns on its portfolio.
The government already seeks to optimise state finances and debt, it said, noting it had extended debt maturities to lock in low rates.
It rejected boosting debt or creating a new state fund, arguing this would violate the policy of keeping debt low and only lead to higher refinancing costs in future.
It also saw no need for changes in the way the SNB invests its huge currency reserves, which stood at 648 billion Swiss francs ($631 billion) at the end of November.
(Reporting by Michael Shields, editing by John Revill)