The Swiss National Bank remains committed to negative interest rates and currently sees no opportunity to lift the policy, governing board member Andrea Maechler told Swiss newspaper Sonntagsblick.
The Swiss franc, where many investors seek safety in a crisis, has remained stubbornly strong in recent years.
The central bank gave up an attempt to cap its value in 2015 and has since used deterrent measures such as charging banks for holding franc deposits.
“The financial markets expect a further easing of monetary policy in Britain and in the eurozone, and even in the USA the increase in interest rates goes only slowly,” Maechler said in the interview published yesterday. Interest rates globally will therefore remain low for the foreseeable future, she said. “As long as that is the case, the SNB has no scope to raise interest rates.”
Maechler gave the interview before Federal Reserve chair Janet Yellen told a global monetary policy conference on Friday that the case for a US rate increase had grown stronger, leaving the door open for a hike as early as next month.
The SNB currently charges domestic banks 0.75% on deposits stored with the central bank that exceed 20 times their minimum reserve requirement.
Most Swiss banks have so far refrained from passing on the rates to retail customers, but charges have been passed on to institutional investors such as insurance companies and pension funds, drawing criticism.
“We have always said we would lift the negative interest rates as soon as it is possible.
That still applies,” Maechler said in the interview. “We cannot change the international environment.”
Switzerland is different to most countries that are using negative interest rates to ease access to credit and support their economies, Maechler said.
“We don’t have a credit crunch,” she said.
“We have introduced negative interest rates to maintain the interest rate differential with other countries and so reduce the overvaluation pressure on the franc.”
Negative interest rates remained an important instrument to achieve this, she said, adding she was convinced the positive effects of the policy outweighed any problems.
Without negative rates, the Swiss franc would have been “clearly stronger with the corresponding negative effects for the Swiss economy,” Maechler said.
She also ruled out the SNB using ‘helicopter money’ — printing money for government spending to spur inflation.
“For the SNB that is a no-go,” she said. “For the central bank to give money to the government is against the law.”
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