SNB has increased readiness to intervene in forex markets, chairman says

By John Revill

ZURICH, March 24 (Reuters) - The Swiss National Bank has increased its readiness to intervene in foreign currency markets to dampen appreciation pressure on the Swiss franc, SNB Chairman Martin Schlegel said on Tuesday.

The franc was sought as a safe-haven investment in times of uncertainty, with appreciation pressure rising since the escalation of the conflict in the Middle East, Schlegel said at an event in Zurich.

"The main instrument is the SNB policy rate, but there are situations where it makes sense, in order to get the right monetary conditions, to be active in the foreign exchange market," Schlegel said.

The SNB last week kept its key interest rate at 0% and said it would work to counter any excessive appreciation of the Swiss franc, which pushes import prices lower and threatens the central bank's goal of an annual inflation rate of 0-2%.

The franc reached 11-year highs against the euro at the beginning of March and also gained against the dollar. Inflation has been subdued, standing at 0.1% in January and February.

Negative interest rates had been effective when used in the past, Schlegel said, by making the franc less attractive and dampening appreciation pressure on the currency, but had also had lot of negative side effects.

"We are prepared to reintroduce negative rates, but the hurdle to bring them in is higher," Schlegel said.

Earlier on Tuesday Swiss National Bank Governing Board Member Petra Tschudin said Swiss inflation is likely to climb somewhat over the short term, pointing to upwards pressure on global energy costs.