Swissinfo.ch alerts investors worldwide to a pretty astounding current outcome:
The Swiss still refer to the day of the “Frankenschock”. On January 15 last year, their stable economic lives were shattered by news the Swiss National Bank (SNB) had abandoned its cap on the super-strong franc’s value against the weak euro.
To deter investor inflows, the central bank instead pushed its main policy interest rate even deeper into negative territory – to minus 0.75%.
Almost two years later, the affluent Alpine state’s financial system still functions despite the most negative interest rates in the world; markets clear; savings are kept in bank accounts rather than under mattresses.
Swiss banks’ profits are perky. The Swiss Bankers Association last week reported their net income rose 5% last year to CHF64.6 billion ($66.5 billion) – the highest since before the 2008 global financial crisis.
So is Switzerland an example of how negative interest rates can work? Does it offer lessons for other financial markets, including the UK, where official interest rates may yet “go negative”? The answer to both is “yes” – but maybe only in the short term.
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