Swiss Central Bank should modify its monetary policy

Swiss Central Bank should modify its monetary policy in favor of negative interest rates, without intervening the currency market in an attempt to weaken the CHF, urged the International Monetary Fund (IMF). The policy of the regulator for interest below zero and interventions helped to reduce the deflationary pressures and to counter last year’s jump in the exchange rate, writes in the annual report of the fund for the Swiss economy.

“However, the central bank should consider even lower interest rates in negative territory or reduce the minimum amount of deposits that are exempt from the negative interest to become the franc even less attractive as a safe haven currency”, said the chairman of the IMF mission in Switzerland. “There is space for maneuver down. If there are constant small inflows of capital to the Swiss franc, institutions can deal with them better than to intervene in the Forex market”, added she.

Currently, the deposit interest rate in Switzerland is -0.75%. The negative interest policy was sharply criticized by politicians and bankers in the small alpine country and impede pension funds and insurers because lower ROI. The focus on negative interest rates will help reduce the risks to the interventions of the bank, which raised international reserves to 640 million CHF in late July.

IMF predicts that the Swiss economy will expand by 1.5% in 2016, before GDP growth to stabilize around 1.75% in the medium term. The IMF said that the Swiss economy has done relatively well with the sharp appreciation of the franc when the regulator untied exchange rate against the EUR.

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