Thursday, December 12, 2024, the Swiss National Bank (SNB) in Bern, Switzerland.
Stefan Wermuth | Bloomberg | Getty Images
Swiss National Bank further lowered interest rates by 25 basis points to 0% on Thursday, heightening concerns about potential returns.
The market generally expects a decline in advance after traders priced about 81% of their job cuts at about 81% of their chances of 81% of their chances of 81% of their chances of slashing 50 baselines at about 19% of their chances of 19%.
“Inflation pressures have fallen compared to the previous quarter. With today’s monetary policy easing, the SNB is opposing lower inflationary pressures,” the central bank said in a statement.
It added: “SNB will continue to monitor the situation closely and adjust its monetary policy if necessary to ensure inflation remains within the range that is consistent with price stability in the medium term.”
Switzerland faces contraction as other countries continue to fight inflation Consumer Price May fell 0.1%.
It is not uncommon for Switzerland to have low inflation rates – the country has had several periods of inflation in the 2010s and 2020s. The strength of the country’s currency, the Swiss franc, is a major contributor to this trend.
“As a safe haven currency, the Swiss franc is often appreciated when world markets are under pressure,” said Charlotte de Montpellier, a senior economist in Britain, France and Switzerland.
“This systematically drives the price of imported products. Switzerland is a small open economy, with imports accounting for a large proportion of CPI (Consumer Price Index) inflation,” Montpellier told CNBC ahead of the central bank’s announcement.
At the high level of global economic uncertainty, the franc has been strengthening in recent months and is widely expected to continue moving forward on this path, indicating the ongoing challenges of the SNB.
Montpellier said that since the strength of the franc has been the main driver of low inflation in Switzerland, the SNB is now taking steps to limit currencies’ consolidation restrictions.
After the interest rate is determined, franc Strengthened, trading of USD against the USD against the Swiss currency.
Negative rate?
Adrian Prettejohn, a European economist in capital economics, told CNBC ahead of Thursday’s interest rate decision that he expected interest rates to fall to -0.25% this year, but noted that SNB could be lowered.
“If inflationary pressures do not start to increase, SNB will develop further in the future, and the minimum rate that policy rates may reach is -0.75%, which is the rate that was achieved in the 2010s,” he told CNBC.
Prettejohn said reducing interest has taken the currency seriously, making borrowing cheaper and encouraging investment.
However, negative interest rates also have some concerns and risks, including savers, who can see any profits that saves are wiped out, and bank loans to lower returns.
Ultimately, negative interest rates could “distort financial markets, compress bank profit margins and raise concerns about long-term financial stability,” ING’s De Montpellier noted.
