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Swiss franc 'clearly overvalued': SNB Governor

The Swiss franc is "clearly and significantly overvalued" Swiss National Bank (SNB) Governor Thomas Jordan told CNBC, adding that the divergence in monetary policy across the globe created a "complex policy environment."

The Swiss franc rose against the euro on Thursday after the central bank kept its target range for three-month Libor at between -1.25 and -0.25 percent at its quarterly policy meeting, as analysts polled by Reuters had expected.

Thomas Jordan, president of the Swiss National Bank (SNB), pauses during the Swiss International Finance Forum in Bern, Switzerland.
Matthew Lloyd | Getty Images
Thomas Jordan, president of the Swiss National Bank (SNB), pauses during the Swiss International Finance Forum in Bern, Switzerland.

The SNB stunned markets earlier this year after it removed the three-year old cap of 1.20 Swiss francs per euro.

Jordan said the decision to drop the cap in January was not a "panic reaction," at the time and was a "well thought-out decision." He added that he expected the value of the Swiss franc to ease back to "more sustainable levels".

The SNB is expected to continue to intervene in currency markets as well as use verbal intervention, but left its benchmark interest rate unchanged. Jordan declined to comment on a specific exchange rate the bank was targeting.

"Despite depreciating somewhat in recent months, the Swiss franc is still significantly overvalued," the central bank said in a statement. "The negative interest rate and the interest rate differential with other currencies make the Swiss franc less attractive, and continue to help weaken it."

Addressing deflation fears, Jordan said the current negative inflation rates were "not optimal".

"We would prefer having a situation with positive inflation rates. But given the situation we are in, negative inflation is part of the adjustment process, so half of the negative inflation is due to the oil price and the other part is due to the appreciation if the Swiss franc," he said.

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