Swiss Rate Cut Can’t Be Ruled Out, SNB Chief Economist Says

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The Swiss National Bank has additional room to cut its already negative interest rate, the central bank’s Chief Economist Carlos Lenz told Swiss Sunday newspaper NZZ am Sonntag in an interview.

“It’s not ruled out, but they cannot fall indefinitely,” Lenz said when asked if interest rates could decline further. “What’s crucial: cash has an interest rate of 0%. If the rate on bank deposits is significantly below that, clients will withdraw their funds. But that threshold hasn’t been reached because holding cash also comes with high costs. That’s why the national bank still has room for downward maneuver.”

Since 2015, SNB policy has consisted of a deposit rate of -0.75% plus a pledge to intervene in currency markets, if necessary, to keep the franc in check. Banks, which argue negative rates depress their profitability, are becoming increasingly loud in their criticism.

Lenz said rates will eventually turn positive. “But today it’s impossible to gauge when that will happen.” He added that it’s part of the SNB’s intention that negative rates discourage savers from holding cash in their bank accounts and incentivize higher-risk investments to boost the economy.

To contact the reporter on this story: Jan Dahinten in Zurich at jdahinten@bloomberg.net

To contact the editors responsible for this story: Jan Dahinten at jdahinten@bloomberg.net, James Amott, Bruce Stanley

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