By Neil MacLucas 

The negative interest rates imposed by the Swiss National Bank in January will help to weaken the Swiss franc over time, which remains "significantly overvalued," according to Thomas Jordan, the president of the bank's governing board.

The goal of the SNB's current two-pronged monetary policy--negative interest rates and a readiness to intervene on currency markets to weaken the franc--is to make Swiss assets less attractive to global investors, Mr. Jordan said, in a paper presented at a central bank conference in Jackson Hole.

On Jan. 15, the SNB scrapped a three-and-a-half-year policy that had capped the franc at 1.20 francs per euro. The policy was designed to blunt the strength of the currency--as it was bought by investors seeking a haven--to shield Switzerland's export-reliant economy, which depends on the eurozone for almost half of its exports.

The SNB repealed the cap without warning and began charging banks a 0.75% fee on deposits with the central bank.

In his comments, Mr. Jordan again defended the move, saying it was necessary to avoid an uncontrolled expansion of its balance sheet.

Since the cap's removal, the franc has moved steadily toward parity with the euro as the European Central Bank has flooded the market with euros under its massive bond-purchase program.

However, the franc has weakened in recent weeks, and is currently trading around 1.0850 per euro, compared with 1.0400 per euro about three months ago.

One result of the franc's strength has been a decline in the cost of imports, especially those from the eurozone, which in turn has pushed Swiss consumer inflation into negative territory.

"While most of the recent negative Swiss inflation is linked to lower imported goods prices, inflation expectations have remained well-anchored suggesting the SNB's commitment to medium-term price stability remains credible," he said.

Mr. Jordan also reiterated the strong franc will mean lower economic growth for Switzerland and poses considerable challenges for the economy, he said.

The SNB, which has trimmed its forecast for Swiss growth this year to 1%, from 2% before the cap's repeal, will next meet to review monetary policy on Sept. 17.

Write to Neil MacLucas at neil.maclucas@wsj.com

(END) Dow Jones Newswires

August 28, 2015 12:39 ET (16:39 GMT)