SNB's Schlegel warns high market uncertainty 'poison' for growth

By John Revill

LUCERNE, Switzerland, May 19 (Reuters) - Financial market uncertainty is currently "very high", which is "poison" for economic growth, Swiss National Bank chairman Martin Schlegel said on Monday.

Speaking in the central city of Lucerne, Schlegel said the outlook for Swiss inflation was very unclear and reiterated that the central bank could not rule out moving its benchmark interest rate back into negative territory.

Noting that negative rates were an extraordinary measure, Schlegel said they had nevertheless had the desired effect when the SNB last used them. The central bank put negative interest rates in place from December 2014 to September 2022.

Schlegel also noted appetite for the safe haven Swiss franc tended to increase during times of high uncertainty, in a nod to its appreciation since U.S. President Donald Trump unleashed a raft of tariffs on U.S. trade partners last month.

"The uncertainty is currently enormous," Schlegel said. "You can see this on the dollar-franc exchange rate and also the euro-franc exchange rate. The Swiss franc is a safe haven and investors are seeking a safe haven in stormy times."

The central bank chief also reiterated that Switzerland is not a currency manipulator, and that the SNB had only intervened in markets to prevent the overvaluation of the franc, and not gain a competitive advantage for the country.

Schlegel said last week there was a sound grasp of Switzerland's position on the franc among technical experts in the United States, which branded Switzerland a currency manipulator in President Donald Trump's first administration.

Schlegel said the dollar was the backbone of global financial markets and that U.S. treasury bills were highly liquid, so they would remain a draw for investors.

"There's no current or foreseeable alternative to U.S. treasuries," he said. "There is no alternative to this market."