Swiss central bank wary of housing bubble

[ZURICH] Swiss National Bank (SNB) officials are counting the cost of their zero interest-rate policy.

After more than two years of targeting three-month Libor between zero and 0.25 per cent, coupled with a currency ceiling to keep the euro region's debt crisis at bay, president Thomas Jordan and his colleagues are increasingly focused on the domestic fallout. The Swiss property market, fuelled by cheap mortgages, is experiencing its biggest boom in two decades.

The SNB, which delivers its quarterly decision today, has warned of overheating in the real estate market and earlier this year pushed the government to require banks to hold more capital to temper it.

That initial step on its own may not be enough to prevent a bubble from forming, say economists including …