The Swiss National Bank announces a negative interest rate for the first time since the 1970s, hoping that by forcing banks to pay to deposit francs it can stem a flight to the safe-haven currency sparked by euro zone fears and crisis in Russia. David Pollard reports.
Switzerland - its chocolate box scenery a massive earner - as is the iconic Swiss franc. And that's a problem. Safe haven flights into the cherished Swiss currency have been driving it up to levels where exports get hurt. The worsening crisis in Russia is one factor, fears of euro zone deflation another. In move to stop it happening, the Swiss National Bank has done what few have done before - imposed negative interest rates. -0.25 per cent on "sight deposits" - cash commercial banks hold with the central bank - that exceed a certain threshold. SNB chairman Thomas Jordan told a news conference the bank remained committed to defending a 1.2 euro the cap on the franc - set at the height of the financial crisis. The bank will buy up unlimited quantities of foreign currencies to do so. The move did ease pressure on the franc - but got mixed reviews from investors. One described it as ''no silver bullet'' - the SNB likely to face pressure again. The last time Switzerland had negative interest rates was in the 1970s. Denmark's negative interest rates on certificates of deposits - which ended in April - was widely viewed as a success in keeping the Danish crown stable - but at a high cost.