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.

However, since the summer of 2022, the situation has begun to change. First, the base refinancing rate increased from -0.75% to -0.25%, and in September 2022, the interest rate became positive and now stands at 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 rate on the money in your account will help offset the costs of maintaining it, and in some cases, even generate a small profit. Another positive development is that many Swiss banks have waived the additional fees for deposits over 500,000 francs.

Furthermore, the rate hike should have a positive impact on the Swiss franc's exchange rate against major global currencies, meaning it could also offer potential profits. The hike could also be driven by increased demand for this currency, as many investors have been reluctant to use it due to the negative interest rate.

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

At the same time, there will be some negative consequences: loans will become more expensive, which will have a negative impact on the economy and the housing market.

A stronger Swiss franc will make goods produced in the country more expensive and less competitive on global 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 proceed according to the scenario described above; in recent years, the currency market has not always obeyed economic laws and has often behaved completely unpredictably.

It's also not recommended to transfer savings from euros to Swiss francs, as the euro is currently nearing its lowest point and there's hope for its long-term growth. However, the US dollar or the national currency can be safely exchanged for francs.