The Swiss National Bank on Thursday said it would impose negative interest rates on cash held by other banks at the central bank, seeking to discourage safe-haven buying by investors anxious about the crisis in Russia and oil’s slide.
In a brief statement, the SNB said it would impose an interest rate of -0.25 per cent on sight deposit account balances of over 10 million Swiss francs and expand its three-month Libor target range to -0.75 per cent to 0.25 per cent. The measures will take effect from January 22.
The franc fell after the announcement to its lowest against the euro since mid-October and to its weakest against the U.S. dollar since May, 2013. “Over the past few days, a number of factors have prompted increased demand for safe investments,’’ the SNB said in its statement. “The introduction of negative interest rates makes it less attractive to hold Swiss franc investments, and, thereby, supports the minimum exchange rate.’’ The central bank also stressed its determination to defend that the minimum rate, a cap of 1.20 per euro for the franc, which the bank set the cap at the height of the euro zone crisis in 2011, and said remained its key policy tool.
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The franc, the most liquid safe-haven currency after the Japanese yen, has stuck close to the 1.20 limit in recent days as fears of a full-blown crisis in Russia and economic weakness globally prompted investors to seek safety.