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SNB says negative inflation rate is part of adjustment process

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Swiss National Bank Vice President Fritz Zurbruegg said the economic backdrop remains far from normal and kept alive policy makers' ongoing threat of currency interventions to tackle the "overvalued" franc.

[ZURICH] Switzerland's negative inflation rate helps the economy to stand up to its rivals, according to Swiss National Bank board member Andrea Maechler.

Declining consumer prices are a "necessary part of the adjustment process to allow the Swiss economy to stay competitive," Maechler said on Tuesday at a conference in Lausanne that was hosted by newspaper Le Temps.

Prices slumped 1.1 per cent in 2015, the most since 1950. The SNB predicts they will fall an average of 0.5 per cent this year before rising 0.3 per cent in 2017. Maechler, who joined the central bank's board in July, confirmed that forecast on Tuesday.

The negative inflation rate is one of the fallouts of the SNB's unexpected move a year ago to abandoned its franc cap. That decision also proved a blow to Swiss exporters. While their situation remains difficult, they may benefit from a pickup in global growth, according to Maechler.