SNB chairman says Fed independence 'important for the world'

By John Revill

DAVOS, Switzerland, Jan 21 (Reuters) - Central bank independence is crucial to controlling inflation, Swiss National Bank Chairman Martin Schlegel said on Wednesday, as the U.S. Federal Reserve chair faces a criminal probe and an onslaught of ​attacks from President Donald Trump.

The SNB was one of several central banks that lined up in support of Jerome Powell ‌last week after Trump's Justice Department threatened him with a criminal indictment.

Powell has called the investigation, which is looking into the renovation of two Fed buildings in ‌Washington, a pretext to put pressure on the central bank to cut rates, as Trump has repeatedly called for it to do.

"Central bank independence is very important. A central bank needs to be independent to fulfil its mandate, which is price stability," Schlegel told Reuters on the sidelines of the World Economic Forum in Davos, Switzerland.

"The Fed is a very important central bank. Not only for the U.S., it's very important also ⁠for the world ... It's really important that the ‌Fed is independent," he said. "Typically, when a central bank is not independent, inflation is higher."

SAFE-HAVEN SWISS FRANC RISES AS GLOBAL TURBULENCE RETURNS

Recent global political turbulence has triggered an appreciation in the Swiss franc, traditionally seen ‍by investors as a safe haven, Schlegel said.

The franc gained nearly 14.5% against the dollar last year, its strongest annual performance since 2002, as Trump's global tariff offensive disrupted global trade and rattled investors.

The U.S. president has revived fears of a trade war with Europe, threatening new tariffs against countries ​opposing his ambition to take over Greenland. The franc has gained 1.4% this week, having otherwise remained steady for most of January ‌prior to that.

This appreciation reduces the value of the SNB's dollar-denominated assets, with dollar holdings making up around 36% of its 765 billion francs ($966 billion) in foreign currency reserves.

Schlegel said the SNB considered the liquidity of its assets as well as the stability of their value but did not comment directly on whether the exchange rate shift would lead to the SNB reducing its dollar holdings.

"What's important for us is diversification, with currencies, so U.S. dollars, euro, and so on, but also in other instruments, government bonds, corporate bonds, and also ⁠equities," he said.

"So we are looking at our investment universe constantly, and ​we are able to make decisions if necessary."