(Includes comments on United States)
VEVEY, Switzerland, Nov 1 (Reuters) - The Swiss National Bank will follow the market reaction to the U.S. presidential election and remains ready to take action to curb the “significantly overvalued” Swiss franc, the central bank’s chairman said on Tuesday.
On Tuesday the Swiss franc firmed past 1.08 to the euro and reached its strongest level since the end of June as increased expectations that Donald Trump may become U.S. president prompting safe-haven inflows into the currency, traders said.
Speaking at an event in Vevey, SNB Chairman Thomas Jordan declined to go into details about the prospect of Trump becoming president, saying the SNB would closely monitor the market situation.
But he suggested it would be bad for the small, open and export-oriented Swiss economy if the United States started working against free trade.
“It’s important that Europe, the United States, China, all these countries, continue to take the view that international trade is a good thing and they take action against protectionism,” he said.
Jordan told local business leaders at the event that Swiss monetary policy was based on “two pillars”: intervention on the monetary markets and negative rates.
“The goal of this policy is to absorb and reduce pressure on the Swiss franc, support the economy and bring back positive inflation,” he said. The policy remained appropriate, he said, with the franc still “significantly overvalued”.
Jordan said monetary policy was much more difficult than 10 years ago and that the risks for the global economy remained to the downside because of uncertainty around the euro and Britons’ vote to quit the European Union.
The SNB has been buying currencies in large quantities and has also charged a negative interest rate of minus 0.75 percent on deposits it holds for commercial banks beyond a certain threshold since January 2015.
Jordan said Switzerland was having to get used to a more moderate growth rate, with GDP growth expected at 1.5 percent this year. (Reporting by Tom Miles, writing by John Revill; Editing by Kevin Liffey)
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