News and Finance

Swiss National Bank Governing Board member Thomas Jordan said the current level of interest rates in Switzerland is “appropriate'' and that the central bank is closely monitoring risks to inflation and economic growth.

“There are no indications that the interest rate level is not appropriate for the foreseeable future,'' Jordan told reporters today after giving a speech in Zug, Switzerland. In his presentation, he said that the national bank is “very closely'' watching the economy and inflation “in order to recognize the need for action early on and to react quickly and flexibly.''

The SNB left its target interest rate unchanged at a six-year high of 2.75 percent last month as it balanced the threat of inflation against a worsening economic outlook. The Swiss financial industry, which accounts for about 15 percent of the economy and contributed about 50 percent to growth in recent years, has been hit by record defaults on U.S. home mortgages.

Jordan's remarks echo SNB President Jean-Pierre Roth's comments last week that the “gradual normalization'' of interest rates has resulted in tighter monetary conditions and “should ensure price stability in the medium term.''

`Inflation Hump'

Still, with oil reaching a record $119.93 a barrel today, the short-term inflation outlook is worsening. “The higher oil prices mean that the inflation hump we have right now may continue,'' Jordan said. Swiss consumer prices increased at the fastest pace in more than 14 years last month as businesses passed on higher costs for raw materials and energy.

Investors expect the SNB to raise rates by the end of the year, futures trading shows. The implied rate of the 3-month Liffe contract expiring in December was 3.06 percent at 11:21 a.m no fax payday advances. in Zurich. That compares with 2.74 percent on April 15.

Given the present state of the economy, the current interest rate “seems'' to be appropriate, Jordan said.

So far, the Swiss economy has shown few signs of cooling. Swiss exports rose at the fastest pace in more than a year in March as orders from Europe and Asia blunted the impact of a U.S. slowdown. Swiss inflation may recede below 2 percent over the course of this year, according to Jordan.

`Positive Prospects'

“Despite all negative external influences, prospects for the Swiss economy remain positive,'' he said, noting gross domestic product may expand between 1.5 percent and 2 percent this year. Switzerland's “robust labor market'' and “competitive industrial sector'' will cushion the impact of the financial crisis.

Jordan cautioned that slower growth in the U.S. and Europe will harm exports this year and that Swiss economic growth will suffer from financial market turmoil.

Credit Suisse last week reported a 2.15 billion-franc ($2.08 billion) net loss for the first quarter after writedowns of 5.3 billion francs on leveraged finance and mortgage-related securities. The bank's losses have been dwarfed by almost $38 billion in writedowns at UBS over the past three quarters.

“The turbulence on international financial markets, which began in August 2007, is having a generally negative impact on the Swiss economy,'' Jordan said. “Declining activity on financial markets can hit Switzerland harder than other countries because of the weight of the banking sector.''

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