SNB's half point rate cut. The effects for the economy

The Swiss National Bank (SNB) lowered its main rate by a half-percentage-point to 0.5%, the lowest since November 2022. Prof. Edoardo Beretta, Adjunct Professor at the Faculty of Economics at Università della Svizzera italiana (USI), analysed the reasons behind this decision and its consequences at the microphones of Il Quotidiano (RSI).

The reasons behind the reduction in the main rate are low inflation, slow economic growth and the strong franc. "It is a choice that indicates that the SNB wants to ward off deflationary pressure," Professor Edoardo Beretta explained, "and therefore proactively cuts the main rate. Only the future will tell us whether there has not been over-zealousness, since in doing so the main rate has been brought back down to a low level, equal to that of autumn 2022". This implies that interest rates will fall, although not as much as one might expect, due to the lack of liquidity.

The SNB's decision disadvantages savers with variable interest accounts, as explained by Professor Beretta.: "Unless the interest rate is permanently fixed, there is very little, if any, return on capital".

Concerns are rising over the possibility of negative interest rates. According to the USI professor, in order to deal positively with the situation that has arisen, it is necessary to find the right balance between stimulating the productive economy and encouraging savings without penalising savers.