SNB head warns against hiking rates too early-paper

* Hildebrand defends SNB intervention policy

* Risk and uncertainty in world economy picked up since June

* SNB still sees 2 pct growth in 2010

* Pace of growth likely to ease in H2, 2011

ZURICH, Aug 21 (BestGrowthStock) – Switzerland’s central bank chief
warned against hiking rates too soon and said that risks to the
bank’s latest economic growth forecast had become more acute, in
an interview with Swiss newspaper TagesAnzeiger.

The Swiss National Bank is sticking to its June growth
forecast of 2 percent for 2010, but it still expects growth to
slow in the second half of the year and in 2011, SNB Chairman
Philipp Hildebrand was quoted as saying.

“The economic recovery, especially in the United States but
also in China, has cooled off. In Switzerland the real
appreciation of the Swiss franc will have an impact on exports,
with a certain delay,” Hildebrand said.

Markets expect the SNB, which stuck to its ultra-low 0.25
percent target rate in June, to make its first post-crisis rate
hike in 2011.

“We cannot tighten too early, because we would then risk
that the weakening trends would gain more prominence. On the
other hand, we must also not wait too long, because this could
endanger price stability in the long term,” Hildebrand said.

The central bank has already unwound unconventional measures
such as asset purchases and currency intervention.


The SNB faced sharp criticism in Switzerland for its
intervention policy of selling Swiss francs for euros as part of
a bid to prevent the franc from rising too sharply and thus
stave off deflationary risks and protect the country’s economic

“We were standing before the decision: Either we let the
franc rise strongly, and then Switzerland would have to carry
the costs in the form of a deflationary spiral and an
unemployment rate of possibly 8 percent. Or we take aggressive
action,” Hildebrand said.

“Today we have growth of around 2 percent, falling
unemployment rates, and price stability has not been endangered,
but the SNB has a bloated balance sheet with the associated
valuation risks. So for me, it is quite clear that we chose the
right path,” he said.

The Swiss franc rose some 10 percent against the euro in the
first six months of the year and has risen strongly again in
recent sessions, regaining much of the ground it lost in July
and at the start of August. [EURCHF=]

The central bank said it made a loss of 2.8 billion Swiss
francs ($2.7 billion) in the first half of the year, mainly
because of losses on its currency reserves. [ID:nLDE67C067]

Hildebrand said the SNB was still able to take action
despite the balance sheet risks.

“The limits for us are set where possible additional
expansionary monetary policy would cause inflation in the long
term,” he said.

The Swiss economy, which is heavily dependent on exports,
has emerged less bruised from the global recession than many
other European countries, thanks to its resilient consumers.

(Reporting by Katie Reid, editing by Jane Baird)

SNB head warns against hiking rates too early-paper