Negative interest rates are “essential” for the Swiss economy and will not be reversed without a significant change in global economic conditions…
By Sam Jones
Financial Times, London
Thursday, October 31, 2019
Negative interest rates are “essential” for the Swiss economy and will not be reversed without a significant change in global economic conditions, Thomas Jordan, head of the Swiss National Bank, warned today.
Mr. Jordan’s remarks come amid mounting concern in Switzerland that the country’s nearly five-year long rate-setting experiment — aimed at curbing the appreciation of the franc and protecting exports — is beginning to create severe structural problems.
The SNB’s benchmark rate, set at minus 0.75 percent, is the lowest of any central bank in the G10 economies. Yields on 10-year Swiss government bonds have been negative for almost a year.Some economists have warned that the policy distorts capital allocation in the economy, artificially skewing investors’ and consumers’ perceptions of risk in subtle but potentially substantial ways. Banks’ margins have shrunk dramatically, while cheap credit has begun to inflate asset prices in some parts of the economy. …
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