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Sept. 29 (Bloomberg) -- The Swiss National Bank won’t rule out negative interest rates or any measure to ensure stable prices, its President Thomas Jordan said today.

A “negative interest rate is in our arsenal of instruments,” Jordan told reporters at the Geneva Press Club. “We don’t exclude any measure to meet our mandate of price stability.”

The SNB set a cap of 1.20 per euro on the franc three years ago to shield the economy from the euro area’s debt crisis. At its policy review this month, the central bank cut its inflation forecasts for 2015 and 2016 citing a deteriorating global environment. It sees consumer prices rising just 0.1 percent this year, with economic growth of 1.5 percent.

“In case of need, we can take supplementary actions immediately,” Jordan said, adding the institution hadn’t intervened to defend the cap since September 2012. “The risk of deflation has increased.”

With the franc trading within one centime of its 1.20 per euro cap and European Central Bank stimulus intensifying pressure, the SNB will probably need to resume purchases to defend the level, according to 15 of 24 respondents in Bloomberg’s monthly survey of economists, published prior to the SNB’s policy announcement on Sept. 18. Ten economists said the central bank may even have to resort to charging banks for excess reserves they keep with it to stave off currency inflows.

The SNB’s expansive monetary policy has kept down the cost of taking out a mortgage, and Switzerland’s residential real estate market has experienced a strong price increase. The SNB was behind the government’s decision to require banks to increase their capital buffer to 2 percent from 1 percent to guard against writedowns. The buffer can be increased as high as 2.5 percent.

“Growth in credit compared to GDP was too strong in past years,” Jordan said today. “We continue to observe the real estate situation closely, to see if there’s a need for further measures.”

--With assistance from Catherine Bosley in Zurich.

To contact the reporter on this story: Thomas Mulier in Geneva at tmulier@bloomberg.net To contact the editors responsible for this story: Fergal O’Brien at fobrien@bloomberg.net Zoe Schneeweiss, Jana Randow

Bloomberg