The Swiss National Bank should think about how or when it will move the benchmark interest rate back into positive territory, despite all the reasons for keeping it unchanged for now.
The experts all agree – Thomas Jordan and his two colleagues at the top of the Swiss National Bank (SNB) will decide next week to keep the benchmark unchanged at where it has been for the past four years – at minus 0.75 percent. Some of analysts have already come to the conclusion that nothing will be changed for another two years, among them the economists at Morgan Stanley.
In other words, the bank on Thursday in all likelihood will say that the franc «is still highly valued» and «the situation on the foreign exchange market continues to be fragile», in keeping with the recent past. The recent slowdown of economic growth and the monetary policy decision by the ECB are factors that speak in favor of maintaining a steady course.
Winners and Losers
The criticism about the policy of the bank hasn’t abated though. The negative rates once were introduced to counter the appreciation of the Swiss franc versus the euro and were designed to shield the export industry from a damaging forex development.
But the policy is a costly exercise for the financial market. Banks are forced to pay interest on their deposits at the central bank and struggle to earn money with their interest business.
Thomas Jordan – With Aplomb
It obviously made sense to put the emphasis on helping the manufacturing industry – after all, it generates a large proportion of the Swiss gross domestic product. Thanks to the strong manufacturing base, Switzerland enjoys full employment and an exemplary social cohesion.
Jordan is a pretty typical Swiss central banker, humble in appearance and, despite the criticism, very much at ease in public – he knows to defend his policy. He would need some strong arguments to suddenly side with the banking industry, a sector of the economy that has caused so much trouble for the country in recent years.
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