By John Revill
ST GALLEN, Switzerland (Reuters) - The Swiss National Bank needs to stick to its current cocktail of negative interest rates and foreign currency interventions to protect the country's economy, SNB Chairman Thomas Jordan said on Friday.
"We don't have negative interest rates because we love them, but it's the best way to implement our monetary policy for the time being," Jordan told an event in St Gallen.
"Negative rates and our willingness to intervene in the currency markets as necessary are the two pillars of our policy."
If the SNB abandoned its current stance, which includes charging a negative interest rate of -0.75% on commercial bank balances above a certain level, the Swiss economy would be damaged by a surge in the value of the safe-haven Swiss franc, which Jordan said remained "highly valued."
"What would happen if the SNB increased interest rates to zero? The overall results would be much worse than it is at the moment," Jordan said. "The instruments we have don't please everyone, but are necessary to fulfill the mandate of the SNB."
He dismissed concerns about the huge size of the SNB's balance sheet, which has grown larger than the entire Swiss economy.
Current inflation expectations were very low, while even if the SNB suffered massive losses from its stock and bond investments it could not become insolvent because of its ability to create money.
Jordan said he was concerned about the escalating trade war between the United States and China and the possible side effects it could have on Switzerland.
"Everything that is harming global trade creates a more difficult environment for us. The likelihood that Switzerland will be impacted is very big," Jordan said.