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Interest rates could rise if franc stays weak

The Swiss franc is too low against the euro and its continued weakness could trigger more interest rate rises, the head of the Swiss National Bank has warned.

"We are really concerned if [it] loses further value," said the institution's chairman Jean-Pierre Roth on Wednesday in St Gallen

"A lasting tendency towards weakness of the Swiss franc could trigger inflationary effects. We know that we would have to meet such a development with interest rate policy sooner or later," he added.

The currency has recovered somewhat from a record low in October versus the euro but is still hovering around SFr1.66 franc per euro, down some three per cent this year.

In real terms, the franc has lost about 14 per cent since the euro's introduction in 2002 according to Roth.

When the national bank left its benchmark interest rate unchanged at 2.75 per cent last week, it said its price outlook had improved, forecasting inflation would ease to an average of 1.5 per cent in 2009 after a spike due to higher oil prices in 2008.


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