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report published by the group on Monday after a meeting with SNB
officials outlined how the bank might respond should currency
intervention not curb market turmoil, perhaps in the event of a
British vote to leave the European Union.
One option would be to prevent banks from switching reserves
into cash. That would require a new law, but the Roubini Global
Economics report said SNB officials "were confident that the
legislation could be changed ...to give the bank this
authority".
The SNB, which now uses negative interest rates and currency
intervention as its main tools to keep the strong franc in
check, declined to comment on the report.
The SNB's preferred tool for easing would remain FX
intervention, though additional -- and possibly "irregular size"
-- cuts to the policy rate might be made "if a large shock
threatened to trigger massive franc appreciation — particularly
versus the euro," the group said.
The central bank was unlikely to ease policy at its next
ratesetting meeting on June 16, it said.
Roubini, who famously predicted the 2008 financial crisis, is
also a professor at New York University's Stern School of
Business.
Should Britain's "Leave" camp win the Brexit referendum on June
23, currency intervention alone might not be enough to keep a
lid on the franc, Roubini said.
"We believe the SNB has the ability to reduce the sight deposit
rate to -1 percent (or even -1.25 percent if it decided against
adopting other tools such as quantitative easing)", it said. The
SNB now charges banks 0.75 percent on some deposits, and aims to
keep three-month LIBOR around -0.75 percent as well.
The first cut in the sight deposit rate would likely be 25 basis
points, the Roubini group said.
"SNB officials say they do not have an issue using 'irregular
size' cuts if they get a big enough bang; firing 'smaller
bullets' would allow the bank to fire more shots before reaching
-1 percent. We cannot rule out a cut larger than 25 basis points
(either) if warranted," the report said.
Roubini's group said SNB remained comfortable with developments
in the real economy but was not happy about the deflation that
Switzerland is experiencing.
"However, SNB officials are willing to be patient on this score,
as many deflationary drivers are external," it said.
"Given the extremely low level of interest rates, the SNB is
keeping some ammunition in reserve."
(editing by John Stonestreet)
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