SNB's Martin strikes cautious note on prospect of negative rates

ZURICH, Aug 27 (Reuters) - The bar is higher for the Swiss National Bank to move interest rates into negative territory than it would be to cut rates if they were still above zero, the central bank's Vice Chairman Antoine Martin was quoted as saying on Wednesday.

The SNB in June cut its policy rate to zero and has not ruled out taking the rate below zero with inflation low, even though it has stressed it does not like negative rates.

Still, in an interview with Swiss newspaper L'Agefi, Martin said that while past experience has shown that negative rates can be effective, they also create more challenges for banks, investors, and households, which take on more risks.

"This phenomenon could have negative effects in the long term," he said. "It should be noted that the requirement level for introducing negative rates is higher than it is for cutting interest rates (when) in positive territory."

The SNB, which targets annual inflation of between zero and 2%, introduced negative rates from late 2014 to 2022.

Swiss inflation inched up to 0.2% in July, and Martin said the SNB does not see the risk of deflation, noting that its forecasts point to a jump in inflation in coming quarters.

The dollar's recent weakness against the Swiss franc should not have a dramatic effect on inflation, Martin added.

He noted that the current value of the Swiss currency was more a matter of dollar weakness than of franc strength.

The SNB policymaker said the economic outlook is uncertain and that the central bank had been in contact with the Swiss government to share its expertise on the potential impact of U.S. tariffs currently set at 39% against Switzerland.

"The SNB, however, does not play a political role," he told L'Agefi.