The introduction of negative interest rates makes it less attractive to hold Swiss franc investments, and thereby supports the minimum exchange rate, the Swiss Central Bank said.
Switzerland is introducing a negative interest rate on the deposits it holds for lenders, its central bank said on Thursday, moving to hold down the value of the Swiss franc amid the turmoil in global currency markets. The Swiss National Bank said in a statement from Zurich that it would begin charging banks 0.25% on bank deposits exceeding a certain threshold.
“Over the past few days, a number of factors have prompted increased demand for safe investments,” the central bank said. “The introduction of negative interest rates makes it less attractive to hold Swiss franc investments, and thereby supports the minimum exchange rate.”
In putting in place the negative rate on 22 January 2015, in essence a tax on excess deposits, the Swiss monetary authority joins the European Central Bank, which in June 2014 introduced its own negative 0.1% deposit rate, and changed that to minus 0.2% in September 2014.
The bank acted as the crisis in Russia and plummeting oil prices have caused a sharp correction of global currencies and financial assets.
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