Former SNB Vice President Danthine Doubts Negative Rates Generally Work

(Bloomberg) --

Former Swiss National Bank Vice President Jean-Pierre Danthine expressed skepticism whether negative rates generally help boost demand, according to an interview in Le Temps.

“There is a real debate in academic circles over the efficacy of negative benchmark interest rates,” he said. “For a normal economy -- Switzerland, with its safe-haven currency, is an exception -- does it really stimulate economic activity? Personally, I have big doubts.”

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Danthine was one of the SNB officials who in 2015 decided to scrap an upper limit on the franc and cut the deposit rate to a record-low -0.75% to stem appreciation pressure on the franc as the European Central Bank embarked on quantitative easing.

Now, euro-area officials are poised to take interest rates even more negative. That may prompt the SNB to deliver a cut of its own, to maintain the yield spread.

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