Switzerland Tried Negative Rates in the 1970s. It Got Very Ugly
In the looking-glass world of negative-interest rates, the Swiss are in a special category.
The Swiss government imposed heavy reserve requirements. But nothing could stop the influx of capital.
Photographer: Adrian Moser/BloombergIn the looking-glass world of negative-interest rates, the Swiss are in a special category. The Swiss National Bank went below zero ahead of everyone else back in 2014; now they’re poised to slash rates still further. Swiss banks like UBS have followed suit: They’ll soon start charging larger depositors to hold their cash.
The Swiss actually pioneered the practice back in the 1970s for the same reason: to keep their safe-haven currency from appreciating too much. But the lessons of that monetary experiment should give pause to anyone who believes that negative rates can halt capital inflows and appreciation in countries where the currency is fundamentally strong.