* Jordan says too early to reverse ultra-loose mon policy
* Says deflation pressure could return near-term
* Says to keep monitoring franc after crisis ends
* KOF institute pessimistic on economy, cuts 2009 forecast
(Adds more Jordan comments, changes dateline)
By Marc Jones
LUXEMBOURG, Sept 25 (Reuters) - The Swiss National Bank will continue to fight an appreciation of the franc against the euro decisively as it is too early for the central bank to abandon its loose monetary policy, SNB board member Thomas Jordan said on Friday.
The franc will continue to play a role in monetary policy after the end of the crisis because of its importance for Swiss prices and exports, though the SNB will turn to conventional ways once it has exited its ultra-low interest rate policy, Jordan said.
In a speech at an event in Luxembourg, Jordan said stopping its unconventional measures would be premature as deflationary pressures may reappear, echoing the SNB's quarterly assessment from Sept. 17. [ID:nLF466403]
"We counter an appreciation of the franc against the euro decisively," Jordan said. "The growth outlook for Switzerland has improved in recent weeks due to the improvements of the global economy. But it is still not particularly rosy."
The Swiss franc ticked down slightly after Jordan's
comments, trading at around 1.5110 and moving off the 3-month
high hit Thursday at 1.5071 francs per euro, which triggered
speculation about imminent SNB intervention.
Jordan played down the recent rise of the franc. "This is only a small volatility, we do not accept any appreciation ... but there is always some small volatility in the market, that is natural," he told reporters after the speech.
Markets assume that the SNB has intervened at least four
times since it launched the policy in March, anchoring the
exchange rate between 1.50 and 1.52 francs per euro, though the
SNB only confirmed the first intervention.
PESSIMISTIC KOF
The SNB renewed its policy of ultra-low interest rates, bond purchases and market interventions to stop the franc rising, following other central banks which have kept their loose monetary policy.
Signs have been mounting recently that Switzerland is moving out of the deep recession, which it slipped into in mid-2008 as the global slump hit its exporters hard.
The SNB revised its growth forecast up last week, seeing the economy shrinking now by 1.5 to 2.0 percent 2009, following a string of upward-revisions from other economists.[ID:nWEA1422]
But the country's leading economic research institute KOF struck a much more pessimistic tone, cutting its forecast for 2009 to predict a 3.4 percent decline.
The KOF said a sustainable recovery was not on the cards until the middle of 2010 and unemployment was poised to rise to hit record highs in 2011.
MONITORING CLOSELY Jordan also said the recovery in Switzerland would not be fast in the coming quarters and unemployment should continue to rise. "Uncertainties about the global economy and the sustainability of the recovery in the financial sectors were high," he said.
"In the short run, it can even not be fully excluded that deflationary pressures will flare up again," he said. "Therefore, a correction of our monetary policy would be clearly premature in the current environment."
Jordan said the franc's rise in the course of the financial crisis had shown that the currency was still a safe haven.
"I want to emphasise that the goal of the intervention is not a competitive devaluation of the franc," Jordan said, adding that this was highlighted by the fact that the currency's real effective exchange rate has risen strongly.
Jordan said the currency would be factored into the SNB's monetary policy after the crisis because of its influence on inflation and growth.
"The SNB will continue to monitor the franc's exchange rate closely after the financial and economic crisis ended and factor it in accordingly into its monetary policy," Jordan said.
"But this will be mostly done through the conventional steering of interest rates after the exit from the zero interest rate policy."
For highlights of Jordan's speech click: [ID:nLO259114] (additional reporting and writing by Sven Egenter; Editing by Ron Askew)