UPDATE 1-SNB chief says to react if deflation risks reappear

* SNB head sees no deflation, inflation at the moment-paper

* Hildebrand says Swiss growth cld be weaker in H2, 2011

* Says global economic crisis not over yet

(adds further quotes, franc, background)

ZURICH, Aug 25 (BestGrowthStock) – The Swiss National Bank would
react should deflation risks resurface as the global economic
crisis was not over yet, the central bank’s chairman said in a
magazine interview due to be published on Thursday.

The SNB was focusing on its main goal, price stability, and
had no exchange rate target, SNB head Philipp Hildebrand also
told L’Hebdo according to a pre-print of the interview made
available on Wednesday, a day ahead of the French language
magazine’s publication.
“At the moment, we have neither deflation nor inflation in
Switzerland,” Hildebrand said, adding that growth of the Swiss
economy should be around 2 percent this year.

When asked if Switzerland could see negative interest rates,
Hildebrand said: “If deflation risks reappeared, we would try to
respond. We are not there.”

Hildebrand added that compared to June — when SNB conducted
its latest policy review — growth had proven “real” but it
could be a bit weaker in the second half and next year.

Hildebrand warned against giving an all-clear for the Swiss
economy despite the fact that the country had emerged less
bruised from the global financial crisis than many of its peers
and economic data was reassuring.

“This crisis is far from over,” he said. “The big lesson to
learn for Switzerland — and I hope this could contribute to a
more serene and healthy European debate — is to acknowledge
that we are closely linked to the European Union.”

“We have seen that when Europe suffers a negative shock, we
are severely affected,” he said.

The Swiss franc has surged to record highs against the euro
in recent days as investors piled money in to the traditional
safe haven currency.

The franc traded at 1.3000 per euro by 1522 GMT, within
sight of the record level of 1.2968 hit earlier in the
session.(EURCHF=: )

The franc rise accelerated after the SNB dropped its pledge
to intervene in the currency markets at its June meeting, saying
that deflation risks had largely disappeared and the economy was
on track for a healthy recovery.

But industry body Swissmem said on Wednesday the speed of
the franc’s appreciation was a major concern for Switzerland’s
manufacturing industry, squeezing exporters’ margins and slowing
their recovery.[ID:nLDE67O0DE]

The SNB will next decide on its monetary policy on Sept 16.

Markets firmly expect the central bank to hold interest
rates unchanged at ultra-low levels after Hildebrand warned in
another interview published on Aug 21 against the risk of
raising rates too early.[ID:nLDE67K03G]

A spokesman for the central bank said the interview in
L’Hebdo had been conducted a couple of days ago without
specifying the date.

(Reporting by Sven Egenter and Silke Koltrowitz; editing by
Patrick Graham)

UPDATE 1-SNB chief says to react if deflation risks reappear