In its monetary policy assessment, the Swiss National Bank (SNB) has decided to lower the policy rate to 0.25 percent.
According to Philipp Merkt, Chief Investment Officer (CIO) at PostFinance, the latest interest rate cut is partly a reaction to the change in international conditions:
Uncertainty in the international economic and financial environment has risen following the US president’s aggressive trade policies and the huge expansion of debt in the United States and Europe. This makes the Swiss franc attractive and the situation for the SNB uncomfortable.
One hope behind the interest rate cut is to make investments in Swiss francs less attractive in an effort to weaken the upward trend. An excessively strong franc has two unwelcome effects on the Swiss economy: on the one hand it makes it more difficult for Swiss companies to export abroad because their goods become more expensive. On the other, a rise in the Swiss franc’s value further reduces the price of imported goods, which could push Switzerland’s already low inflation rate lower still, towards zero or even into negative territory. However, with its fifth consecutive round of monetary easing, the SNB is also taking something of a risk, says Philipp Merkt :
The SNB’s remaining scope for action in a crisis is shrinking all the time. And that’s despite the fact that domestic demand has stabilized and the Swiss economy has bottomed out.
Given the policy rate cuts, private households should probably prepare for a further fall in interest rates on savings. But there is good news for homeowners: Saron mortgages will become more affordable with a low policy rate. Interest rates on longer-term mortgages, however, are likely to see little change.
Chief Investment Officer