Low Interest Rates in a Post-pandemic World
When the Swiss National Bank (SNB) set its policy rate at -0.75% in January 2015, the step was regarded as an exceptional measure both at home and abroad. More than six years later, the short-term interest rate is still at this level, and long-term interest rates are now also in negative territory. In a new SFI Public Discussion Note, SFI Prof. Philippe Bacchetta from the University of Lausanne examines when the Swiss economy might return to positive interest rates and what implications negative interest rates generally entail.
His conclusions reveal a nuanced overall picture, which can essentially be summarized in the following six key statements:
- Switzerland is no longer an "interest rate island."
- Switzerland's "safe haven" status remains warranted.
- Interest rates have not been significantly affected by the pandemic shock.
- Austerity measures are slowing down the economic recovery and putting unnecessary downward pressure on Swiss interest rates.
- There is no evidence of a systematic decline in bank profits in countries with negative interest rates.
- All relevant factors point to a sustained period of low real interest rates.
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