Swiss central bank could take negative rates lower

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The rate on deposits at the Swiss National Bank (SNB) is currently -0.75%. And while taking the rate further into negative territory is not the base case scenario, it cannot be excluded, according to some economists at the bank UBS.

The probability that the SNB lowers rates further is not a base scenario, according to Thomas Jordan, the bank’s chief, reported the newspaper 20 Minutes.

However, economists at UBS think it is possible, and give it a 30% probability of happening. Part of the challenge for the SNB is the strength of the Swiss franc, which went above 1.080 to the USD in March. On 20 May 2020, one Swiss franc was priced at 1.035 USD.

In January 2020, the US Treasury added Switzerland to its “monitoring list”. Those on the list are trading partners whose currency practices merit close attention. It is no secret that the Swiss National Bank (SNB) has been actively trying to weaken the Swiss franc, which is widely considered overvalued.

In January 2020, the newspaper Bilan reported that negative SNB rates had cost Swiss banks an estimated CHF 8 billion over the last 5 years.

More on this:
20 Minutes article (in French) – Take a 5 minute French test now

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About Investec

Investec is a distinctive Specialist Bank and Asset Manager. We provide a diverse range of financial products and services to a niche client base in three principal markets, the United Kingdom, South Africa and Australia, as well as certain other geographies. Investec’s strategic goals are motivated by the desire to develop an efficient and integrated business on an international scale through the active pursuit of clearly established core competencies in the group’s principal business areas.

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