More and more countries have introduced negative interest rates on significant amounts of money held in banks. In other words, the era of generous interest has disappeared. Now, the banks are taking their “rent” because they are hosting their money.
No matter how good you are at real estate, cryptocurrencies, ice cream parlors or restaurants, it has never been more important than now to invest your savings. Otherwise, you will start to lose. The Vice President of the National Bank of Switzerland recently gave an interview and insisted that, at best, interest rates on global deposits will remain low. In reality, there is a good chance that negative interest rates will become a globally adopted standard.
Fritz Zurbruegg is the Vice President of the National Bank of Switzerland. From this position, he made several predictions about the global future of finance. In his opinion, interest rates will remain low in every corner of the globe. “It is expected that global interest rates will remain unchanged in the next period,” the official said in a speech at the University of Lucerne, writes Agerpres.
Behind this new reality, on the one hand, is the aging of the population. On the other hand, the decline in productivity is also a factor. At the same time, central banks in advanced economies are adopting expansionary monetary policies, Zurbruegg insists.
Ã¢ â¬ ÅSuch a policy is still needed to counter the impact of the Covid-19 pandemic crisis. Therefore, interest rates are expected to remain low for some time to come. We believe that vulnerabilities in the real estate market are currently high, Zurbruegg warned.
For the context and to better understand where the Swiss official’s vision of the financial market comes from, since 2015, the National Bank of Switzerland has kept the rate at minus 0.75% interest for deposits made with SNB. In addition, it intervenes in the foreign exchange markets to stop the appreciation of the Swiss franc. The Swiss currency is seen as a safe haven investment in times of uncertainty, due to the country’s massive current account surplus. These developments are forcing the SNB to intervene on a regular basis to limit the appreciation of the franc and protect the country’s economy dependent on exports.
There is a risk that the banking system will face considerable losses if interest rates rise sharply, although capital reserves will allow most banks to absorb the losses, concluded the vice president of the National Bank.