What will a change in the Swiss franc interest rate bring?

The Swiss franc was and remains one of the hardest world currencies; it is not as popular as the euro or dollar and is used more for storing capital than for making payments.

The Swiss franc has always been one of my favorite currencies, but the main reason why I was in no hurry to transfer my savings into this currency was the negative rate of the Swiss Central Bank.

It’s a rather dubious pleasure to pay 0.75% per year on a deposit in Swiss currency and lose 7.5 francs for every 1000 in the account.

It’s quite easy to calculate how much money is lost in ten years, and if you also take into account inflation and fees for maintaining an account, then the point of such investments completely disappears.

But since the summer of 2022, the situation began to change, first there was an increase in the base refinancing rate from -0.75% to -0.25%, and in September 2022 the interest rate became positive and now it is 0.75%.

What are the pros and cons of raising the key rate?

First of all, this is a huge plus for investors who prefer to keep their savings in this European currency.

Now a positive interest on the money in the account will help offset the costs of maintaining it, and in some cases even bring a small profit. Positive news is that many Swiss banks have abolished additional fees for storing deposits over 500,000 francs.

In addition, the rate increase should have a positive impact on the exchange rate of the Swiss franc against major world currencies, which means it will be possible to make money on this. The reason for the increase may also be the increased demand for this currency, because many investors refused to use it precisely because of the negative interest rate.

The Swiss government expects that this measure will slow down the growth of inflation, the level of which is already approaching 4% per annum.

At the same time, there will be negative consequences; loans will become more expensive, which will not have the best impact on the economy and the housing market.

The strengthening of the Swiss franc will make goods produced in the country more expensive and less competitive on world markets.

But the consequences of such changes can only be felt after some time.

To be fair, it should be noted that it is not at all necessary that everything will go according to the scenario described above; in recent years, the foreign exchange market does not always obey economic laws and often behaves completely unpredictably.

It is also not recommended to transfer savings from euros to Swiss francs; the euro currency is now practically at its lowest point and there is hope for its growth in the long term. But the American dollar or national currency can be safely exchanged for francs.