Thomas Jordan, acting chairman of the Swiss National Bank
ZURICH, SWITZERLAND – The Swiss central bank does not see any risk of inflation for Switzerland in coming months, nor any need to reduce the level of liquidity. However, distortions in the mortgage and real estate market could increase and the Swiss government will soon look at the possible need to intervene.
Thomas Jordan, vice chairman and, since Philipp Hildebrand’s resignation 9 January, interim chairman of the Swiss National Bank (SNB), was addressing the Swiss American Chamber of Commerce Tuesday 6 February in his first major policy statement since taking the reins a month ago. Jordan says the central bank is adhering to its policy of keeping a firm cap on the Swiss franc, a policy that “corrected the overvaluation of the Swiss franc to some extent”.
“Thanks to this decision, investment planning for export-oriented companies has been facilitated, and the risk of both deflation and severe structural damage to the Swiss economy has been reduced. Without this policy measure, the extreme overvaluation of the Swiss franc and its volatility would probably have persisted.”
The SNB set a minimum exchange rate of CHF1.20 per euro in early September of 2011.
A whiff of optimism, but “subdued” outlook might be best we can expect
He offered a crumb of optimism for Switzerland’s financial outlook, saying that “if the European authorities were to credibly commit to a sustainable solution soon, existing uncertainties would be reduced substantially. In such a scenario, demand for perceived safe financial assets would fall in general, and for the Swiss franc in particular”
But he emphasized that we are still living in a world with “substantial downside risks” and the picture could prove worse than today’s “subdued” economic outlook.
“Economic growth will continue to be driven by emerging markets. However, we expect growth rates in China and India – the most important countries in emerging Asia in economic terms – to remain below potential in the near term, due to prior monetary policy tightening, high inflation, and sluggish external demand. Looking at the US, recent data suggest that the situation has improved slightly. However, this should not hide the fact that economic growth in the US is likely to remain sluggish.”
He cites continuing high unemployment in the US and “the fiscal environment remains contractionary. For the euro area – Switzerland’s most important trading partner by far – the economic outlook has deteriorated since last autumn. Uncertainty about an escalation of the sovereign debt crisis is undiminished. As a result, the euro area is likely to face a mild recession in early 2012.”
Liquidity, interest rates and mortgages under debate
Jordan says the SNB’s policy has raised two questions.
“it is argued that the significant increase in liquidity since August 2011 may trigger inflation risks in the longer term. Given the current economic situation, however, expanding the supply of liquidity was a necessary monetary policy response. There is currently absolutely no risk of inflation in Switzerland. First, headline inflation turned negative in October 2011 and continued to decline through the end of the year. It is assumed to fall even further in early 2012. Second, neither our inflation forecasts nor the medium-term inflation expectations from our surveys of households and companies show any signs of inflation risks. Consequently, there is no necessity whatsoever for the SNB to reduce the level of liquidity for the time being.”
The other is the impact of long-term very low interest rates on the housing market.
“On the other hand, a long period of very low interest rates may lead to imbalances in the domestic credit and real estate markets, which may pose serious risks for financial stability. We are well aware of these risks and are analyzing them very carefully. However, due to the exceptional monetary policy situation, interest rates cannot readily be increased to address such threats. In other words, at the current juncture, monetary policy cannot react to these imbalances with conventional monetary policy instruments. Therefore, the Swiss Government is due to decide soon upon the introduction of so-called macroprudential instruments that can be used – if necessary – to mitigate potential credit and housing market distortions.”
Source: Swiss National Bank, 15 December 2011
Updated 10:20 ZURICH, SWITZERLAND – The Swiss National Bank is keeping its promise to “enforce the minimum exchange rate of CHF1.20 per euro with the utmost determination”, including buying unlimited quantities of foreign currency if necessary, it said Thursday morning 15 December in an assessment of Switzerland’s monetary policy.
“Even at the current rate, the Swiss franc is still high and should continue to weaken over time.”
Philipp Hildebrand, SNB chairman
Phillip Hildebrand, chairman of the governing board of the SNB, in his year-end talk to the press Thursday described the global outlook as “subdued” and said the SNB has adjusted its growth assumptions for the euro area substantially downwards.
“The outlook for global growth is nevertheless subdued, and has, if anything, deteriorated since the last monetary policy assessment. The most recent US economic data have been somewhat better than expected, but the escalation of the European debt crisis has clouded the economic outlook for the euro area. Bond yields for fiscally weak states have risen markedly. The growing unease among market participants is also reflected in the increased volatility on the financial markets. Mounting borrowing costs and the high level of uncertainty are contributing to a marked worsening of the business climate in the euro area.”
Hildebrand added that “uncertainty about the future outlook for the global economy remains extremely high. In particular, the European sovereign debt crisis poses grave risks for the international financial system and the real economy.”
Swiss economy affected by eurozone fragility, with falling growth rate
The SNB Thursday lowered growth expectations for the economy in 2012 to 0.5 percent and aiming to keep the three-month Libor range (official lending rate to banks) at around 0 percent. “The substantial appreciation of the Swiss franc over the summer is weighing heavily on the Swiss economy. For 2011 as a whole, real GDP growth of 1.5–2.0 percent can be expected. This is only because of the favourable economic development in the first half of the year,” the central bank notes in a statement.
Fewer jobs, less spending, housing construction slowdown
Hildebrand noted that the Swiss slowdown will have an impact on the jobless rate, which will then impact consumer spending and the rate of new home construction.
“The introduction of the minimum exchange rate has corrected the massive overvaluation of the Swiss franc and has given companies a sounder basis for their investment planning. This notwithstanding, the situation for a big part of the economy remains difficult. Waning global demand will continue to hold back export growth. Economic uncertainty, coupled with a difficult earnings situation for many companies, will curb corporate investment. Moreover, since October, the seasonally adjusted unemployment figure has risen again slightly. The deterioration in the labour market should constrain both consumer spending and investment in residential construction.”
Home loans nevertheless remain strong, says Hildebrand, with domestic mortgages (and corporate lending) continuing “to see robust growth. In the third quarter of 2011, lending standards and conditions for mortgages remained largely unchanged. By contrast, banks reported a slight tightening of lending standards and conditions for corporate loans – especially loans to large companies. Low interest rates continue to have a favourable effect on the demand for loans. In addition, the robust growth in real estate prices, particularly prices for owner-occupied apartments, continued unabated in the third quarter.”
Inflation likely to dip into deflation briefly
The bank sees no risk of inflation in the “foreseeable future”, forecasting an inflation rate of 0.2 percent for 2011, dipping to -0.3 percent in 2012, rising to 0.4 percent in 2013. The SNB notes that “in the short term, inflation will dip into negative territory sooner, owing to the effects of the earlier currency appreciation, which have been stronger than expected. In the longer term, the worsening of the growth outlook for the euro area is dampening inflation.” The forecasts are based on assumptions about a 0 percent Libor and weakening Swiss franc, it cautions, and instability in the global financial system, particularly in the eurozone are creating an outlook that is uncertain.
GENEVA, SWITZERLAND – The price of food rose 14.8 percent in July in China, led by a rise in the price of pork, a staple, which jump nearly 57 percent compared to a year earlier. The higher food prices led to an overall inflation rate increase of 6.6 percent year on year, up from a 6.4 percent y/y increase in June, despite the government’s vow to keep food prices from rising. The government has allowed interest rates to rise five times in nine months, to rein in inflation. Analysts are divided over whether or not its efforts are taking hold and inflating is peaking.
Higher food prices hit low-income workers hardest, with one-third of their income going for food, according to AFP sources.
New reports shed some light on Geneva housing prices
ZURICH, SWITZERLAND – The Swiss National Bank 16 June joined the chorus of cautious voices warning of real estate markets overheating in some urban areas in Switzerland and the risks a sudden sharp economic downturn, not to be excluded despite current economic growth, could pose for banks as well as property owners. The central bank has begun a quarterly survey of Swiss banks’ risk levels.
“In response to signs of imbalances developing in the Swiss mortgage market and to the high uncertainty over the banks’ true risk exposure, the SNB has intensified its monitoring of the mortgage market. For this purpose, at the beginning of 2011, it launched a comprehensive quarterly survey of banks. The survey results will be a key tool for analyzing the vulnerability of the Swiss banking sector, and assessing
the need for further policy measures.”
The carefully crafted words of the SNB’s Financial Stability Report 2011, published 16 June, don’t paint a dramatic picture, but the report does raise flags, even as luxury property reports aimed at buyers outside Switzerland, such as one issued by the New York Times 16 June, paint a rosy picture that overlooks the larger
Cheaper housing: Geneva’s Swiss are buying in Annemasse
Neighbouring France is benefitting to some extent from the high franc and housing shortage situation. Le Temps reports today that 40 percent of the new relatively low-cost housing complexes being built in Annemasse, on the border, belong to Swiss people.
The managing director of a large retail store in the Nyon area told GenevaLunch Thursday that “retailers here are suffering. It’s not catastrophic but it’s not good. We read about how well the economy is doing, but we don’t see it. People are shopping over in France, understandably, with the low euro.”
Interest rates held at low 0.25%
Geneva's old town: a nice place to live, for those who can afford it
The good news for homeowners is the SNB’s decision on interest rates, which will be kept at 0.25 percent for three months, continuing the expansionist monetary policy of the past two-plus years. The central bank notes, however, that the current situation cannot continue for another three years, with low interest rates to fuel the money supply, coupled with a high Swiss franc, in the context of a very mixed economic growth picture in Europe. “Strong growth in the emerging markets and positive developments in Germany and Switzerland contrasted with economic weakness in several other European countries”, in 2010, the report warns.
Swiss market stable except for Geneva, Lausanne region
Swiss residential real estate prices show marked differences, with Wuerst and Partner‘s October 2010 quarterly report on the Swiss market showing 60 communes at risk for real estate bubbles, while the market overall remained “stable”.
The latest report from the company, issued in May 2011, says stability has continued, with one significant exception: “residential rents are expected to continue to remain generally stable. The one exception is the Lake Geneva region: This region is currently experiencing the strongest population growth throughout Switzerland, whilst at the same time residential construction activity has remained moderate in comparison with the rest of the country. Consequently, rents in this region are expected to trend further upwards in the foreseeable future.”
The housing supply rate stabilized in the first quarter of 2011, Wuerst figures show, but the asking price for all residential property in Lausanne and Geneva continued to climb, the only area in Switzerland where this was the case.
Sales prices in Lake Geneva area rose 10% and more: CHF2.26m on average in Geneva
Zurich, Switzerland (GenevaLunch) - International financial media are greeting first quarter figures from UBS with gloomy headlines, despite higher profits posted by the bank in its first quarter results Tuesday morning. UBS published figures showing pre-tax Q1 profits of CHF1.8 million, up over the previous quarter (CHF1.7b), but 18 percent lower than the CHF2.2b Q1 profits in 2010.
Bloomberg, oddly, initially carried a headline of “UBS posts decline in quarterly net on lower securities earnings” but changed the heading to the more upbeat “UBS attracts highest inflows since 2007 as profit tops estimates”.
The bank’s note that net new money is up, “with positive net flows recorded across all of our asset-gathering businesses confirming the return of client trust and confidence”. New money rose from CHF7.1 billion in Q4 2010 to CHF22.3b. The issue of new money has been watched closely by analysts in recent months. Reuters recalls that “clients pulled nearly 400 billion francs from the world’s second-largest wealth manager in recent years after UBS was bailed out following huge writedowns on toxic assets and was hit by US charges that it helped wealthy Americans dodge tax.”
This one is made of chocolate but real shoes cost more in March, as new models replaced February sale items
Zurich, Switzerland (GenevaLunch) – Swiss consumer prices rose 0.6 percent in March 2011, according to the latest CPI (consumer price index) figures released Wednesday 6 April by the Federal Statistics Office. Year-on-year inflation was 1.0 percent.
The annualized rate in February was 0.5 percent.
The main contributors to the rise in inflation were petrol prices, up 4.9 percent and new clothes and shoes hitting the stores after the sales, with an 8.5 percent increase in prices compared to February.
The Swiss franc continues to remain high against other major currencies, but according to Swiss National Bank (SNB) board member Jean-Pierre Danthine, interviewed by Basler-Zeitung shortly before the latest inflation figures were published, the Swiss economy is largely immune to the currency situation, with the very low interest rates providing domestic benefits. The European Central Bank will announce 7 April if it is raising interest rates and the SNB says it is closely watching international developments, one of the greatest risk factors for the Swiss economy.
Related stories: Reuters, preface to the 2010 Annual Report of the SNB, published 7 April 2011
Switzerland: IMF checks economic winds in 2011
Bern, Switzerland (GenevaLunch) - The IMF (International Monetary Fund) in its annual country report on Switzerland says the economy is broad-based in the aftermath of the global economic crisis. It is forecasting 2.1 percent growth for 2011 and 1.8 percent in 2012, when it expects exports to fall.
“Domestic demand is benefiting from low interest rates, increased employment and continuing immigration. In spite of the strength of the Swiss franc, exports have grown due to increased global demand.” Geopolitical tensions could have a negative impact and are the biggest risk factor, agreed the IMF team, who visited Switzerland from 18 to 28 March. Tensions in the euro zone could also spark difficulties.
The SNB (Swiss National Bank) could consider tightening monetary policy, the IMF group says, with rebuilding its capital a priority. The central bank’s capital was drained during the crisis, as were those of many governments. Future dividends to the cantons and the Confederation should be made subject to the ability of the SNB to replenish its capital.
The heaviest criticism was reserved for the banking regulatory system, which needs further work, according to the IMF. The Federal Department of Finance will create a working group to follow up one issue: the mandates of the SNB and Finma, the financial supervisory body, should be clarified, according to the IMF.
Additional capital requirements provided for in the Federal Council’s “too big to fail” consultation draft will be instrumental in limiting the risks posed by systemically important banks. Consequently, the IMF experts warn against allowing overly generous “rebate” possibilities. Switzerland’s new capital requirements are among the most stringent in the world, going well beyond bank capital requirements that are part of the new, global BIS (Bank for International Settlements) Basel agreement.
In the mortgage market, the IMF sees a certain degree of easing in financial institutions’ lending standards, says Bern. “The interest-rate sensitivity of banks’ balance sheets has increased due to the tendency towards fixed-rate mortgages with long maturities” and the IMF is in favour of “implementing more conservative affordability standards”, which could be bad news for new home owner wannabes.
The IMF has given its support to several ongoing improvements:
- “The neutral fiscal position to be expected over the next few years is considered appropriate” says Bern’s statement on the IMF visit
- the measures to restructure disability insurance must continue
- the IMF welcomes the ongoing efforts to strengthen financial planning and statistics.
Source: Swiss National Bank, 17 March 2010 (click on image to view larger)
Zurich, Switzerland (GenevaLunch) - Switzerland’s GDP has been revised upward for 2011, the Swiss National Bank (SNB) announced 17 March, in a relatively upbeat forecast with summary of economic conditions.
Swiss economic recovery “more dynamic” than anticipated
“In spite of the marked appreciation of the Swiss franc, the economic recovery in Switzerland recently proved to be more dynamic than anticipated. GDP growth again exceeded potential growth and was broad based,” the SNB notes in a press release. “Demand for labour has firmed, resulting in a renewed drop in unemployment and short-time work. Despite the noticeable dampening effect of the Swiss franc appreciation, the continued positive business expectations suggest favourable developments in the coming months.”
Interest rates to remain low
Interest rates will remain at their low level, with the SNB noting that it is “leaving the target range for the three-month Libor rate [the rate charged to prime banks] unchanged at 0.0–0.75 percent, and intends to keep the Libor within the lower part of the target range at around 0.25%.”
Global outlook, impact
The SNB’s forecasts are based on prospects for the Swiss economy that “have improved since the last quarter” thanks to a stronger than predicted global economic recovery. “However, continuing debt problems in Europe and the possible dampening effects of high oil prices on economic activity pose considerable downside risks. In addition, the consequences of the earthquake catastrophe in Japan are, at this stage, difficult to assess.”
Geopolitical tensions and rising commodity and food prices will “lead to upside risks to inflation across the globe. Survey data show however that inflation expectations in Switzerland remain stable.”
The impact of the current strong Swiss franc will have a “moderating” impact on the inflation forecast in mid-2012, the SNB says.
Source: Swiss National Bank, 17 March 2010
Dollar weakens against the Swiss franc
The Swiss franc reached another historic high against the US dollar in trading Tuesday, 15 March, as the dollar slipped below CHF0.92.
The Japanese yen also traded close to historic highs as Japanese firms appear to be bringing finance back to Japan to help firms deal with the problems caused by the massive earthquake and tsunami.
The Swiss franc benefited from its traditional role as a safe have in times of uncertainty and from the sound economic performance of the Swiss economy.
Switzerland has low inflation, a current account surplus, a balanced budget and comparatively low national debt.
The Swiss National Bank announces its interest rate policy Thursday 17 March and analysts are expecting rates to be kept near zero.
The British economy is leaving analysts with plenty to discuss following publication 12 January of trade balance figures that show a widening gap and news that the Bank of England is keeping interest rates down. The difference between goods exports and imports grew to £8.74 billion from £8.59b, from October to November. “This was the biggest deficit since monthly records began in January 1980, and confounded expectations for the gap to narrow,” reports Reuters, noting that when “volatile” items such as oil and aircraft are taken out the news is more positive, with some evidence that the relatively weak pound is starting to help exporters.
The Bank of England will announce at noon UK time Thursday 13 January whether it will raise interest rates, but it is widely expected to keep them low, although futures rates are predicting a rise by late spring, from the record low of 0.5 percent. Growing inflation is likely to be a greater concern for monetary policy makers, given that the rate was above the targeted 2 percent during all of 2010 and appears ready to rise to 4 percent during 2011.
Links to other sites: Bank of England, Reuters, Telegraph
SNB revises 2010 Swiss and euro region growth forecasts upwards
Inflation rise will be lower than earlier forecast
A place of one's own (here: Cologny, Geneva), mortgage market mostly unchanged
Ed. note: the dollar rose to CHF1.01 and the euro to CHF1.32 in late Thursday trading against the franc.
Update 16:55 Zurich, Switzerland (GenevaLunch) – The Swiss National Bank (SNB), like the federal government’s group of experts, has raised its forecast for the Swiss economy, saying Thursday 16 September that it expects 2.5 percent GDP growth for 2010, while noting that 2011 will be less rosy. At the same it revised downwards its inflation forecast for the next three years, and it has left interest rates unchanged.
It is leaving the target range for the three-month Libor unchanged at 0.00–0.75 percent and says it intends to keep the Libor within the lower part of the target range at around 0.25 percent.
The Swiss franc rose Wednesday on speculation the SNB would tighten its current expansionary monetary policy and raise interest rates.
SNB September 2010 inflation forecast, Switzerland
On the Swiss mortgage front the bank says “most banks report unchanged lending conditions and a further increase in demand. The growth in mortgage lending and real estate prices has decelerated marginally, compared to the situation at the end of 2009.” The household mortgage situation still requires close watching, it suggests.
Bern, Switzerland (GenevaLunch) - The Swiss Federal Council Wednesday 8 September approved an additional CHF850 million in loans for developing countries, to be administered by the IMF trust fund for developing countries (International Monetary Fund). Switzerland’s share of the trust fund is 5 percent. The loan will be made through the Swiss National Bank. A federal guarantee to require reimbrusement on schedule and interest payment must be approved by parliament. The IMF pays market rate interest.
Switzerland previously agreed to contributions in 1995 and 2001.
The trust fund is increasing its loan resources by $13.5 billion to help developing countries weather the impact of the global economic crisis.
The Royal Bank of Canada has raised the interest rate on mortgages to 6.25 percent on five-year closed mortgages, the third increase in a month. RBC is the country’s largest bank and others are likely to follow, says The Globe & Mail, with the national bank saying that its key lending rate will rise in June.
Meanwhile, the prices, at least in Vancouver, are enough to raise the roof, reports McLeans.
China has ended the first quarter of 2010 with a growth rate of 12 percent, higher than expected. Inflation, up 2.2 percent, was lower than expected but data published Thursday 15 April show that housing prices rose by 11.7 percent in the past 12 months. The strong economic growth has observers saying China could well overtake Japan in 2010 as the world’s second largest economy. Speculation is rife in Western business media about the impact, ranging from fears of the economy overheating and the possibility of the yuan being uncoupled from the dollar to when the government is likely to raise interest rates, which have just gone up in several neighbouring countries.
Links to other sites: Bloomberg, Financial Times, Xinhua
Zurich, Switzerland (GenevaLunch) - The Swiss franc reached €1.50 for the first time since March 2009 Friday 18 December, and it rose against the US dollar to 1.04. The move prompted observers to ask if the Swiss National Bank has stepped back from its policy, in place for more than six months, to weaken the franc.
Links to other sites: Bloomberg, Reuters, Swiss National Bank
Zurich, Switzerland (GenevLunch) – Interest rates will stay low, continuing the policy of monetary expansion, Switzerland’s central bank announced 10 December. The Swiss National Bank argues that the economic recovery is still too fragile to warrant a rise in interest rates which will remain in a range of 0-0.75 percent for the three-month Libor. The bank says it will keep rates at the lower end of this band, and will intervene decisively to maintain the Swiss franc stable against the Euro.
It also announced it was suspending its purchases of Swiss franc bonds issued by private sector companies, a measure introduced to provide the market with liquidity.
Australia’s central bank announced Tuesday 6 October that it is raising its key interest rate from 3.00 to 3.25 percent, and analysts say more increases are on the way. The Reserve Bank cited improved economic conditions and a stronger Australian economy. The country thus becomes the first in the group of 20 major economies, the G20 countries, to raise rates after the cuts seen worldwide in the past 12 months. The Age reports that if banks pass along the rate hike to clients it will mean Aus$40 a month more on a home loan of Aus$300,000.
Links to other sites: ABC News, Australia, The Age, Financial Times
We're all connected: Swiss economic health depends on the world, says SNB
Zurich, Switzerland (GenevaLUnch) - The Swiss National Bank’s (SNB) is guardedly more optimistic than in June about the outlook for the Swiss economy, it said Thursday afternoon 17 September in its quarterly report, but monetary policy will remain loose in order to stimulate the economy. The central bank revised its GDP (gross domestic product) forecast, saying it expects this to fall by between 1.5 and 2 percent, less steeply than forecast in June (2.5 to 3 percent). The key interest rate range remains unchanged at 0.0-0.75, “still aiming to keep the Libor within the lower end of this range, that is, at approximately 0.25%.” The Libor serves as an indicator of shifts in bank lending rates.
The SNB says it will continue to intervene in currency markets to keep the Swiss franc competitive internationally.
Your apartment could cost less by this winter
Bern, Switzerland (GenevaLunch) - The reference interest rate to which rents in Switzerland are linked has fallen to 3 percent, and tenants are now in a position to ask for lower rent.
The US Federal Reserve, the country’s central bank, says that it sees the US economy beginning to stabilize after months of recession. But it kept short term interest rates on hold, near zero percent since December, after its FOMC, rate-setting committee meeting, Wednesday, 12 August. The Fed pointed to improving financial markets as an indicator that the recession is coming to an end. The bond markets dipped a little on the news, disappointed that the Fed was not going to increase its bond market interventions, but then came back. Major stock indices were at highs since the crisis began, and the dollar strengthened against the Yen. Reuters
Unemployment figures in the US are at an all-time high of 9.4 percent, and President Barack Obama says he believes they could go as high as 10 percent. Housing foreclosures set new records, too: more than 360,000 homeowners received a foreclosure filing in July, meaning that legal action was being taken to repossess their homes because they can’t maintain mortgage payments. In the first seven months of the year, 2.3 million homes have been repossessed, auctioned or foreclosed, a record. Reuters, Financial Times (pay), NZZ (Ger)
US interest rates will stay near zero percent and “the pace of the contraction is showing signs of slowing” , said the US Federal Reserve, the US central bank, after its federal open market committee (FOMC) meeting yesterday 24 June in Washington. The Fed said in its statement that household consumption was stabilizing and that businesses were reducing inventories. The prospects for economic growth remain limited, but the danger of deflation has receded and the prices of commodities have risen recently. The US dollar strengthened slightly against the euro and the yen, and the Dow Jones fell on the news.
The Federal Reserve announced no change in its plans to spend $1.45 trillion on buying mortgage-backed securities and mortgage lenders’ debt in order to support the housing market in the US, at the heart of the present economic downturn. Reuters
Bern, Switzerland (GenevaLunch) – The Swiss central bank (SNB) will maintain the monetary policy it introduced in March, it announced today 18 June. Its predictions for the Swiss economy continue to be guardedly pessimistic, because of the negative effects the world economy has on Switzerland. The one positive note has been the decline in the prices of commodities, such as oil, but this has contributed to deflation. Swiss prices will decline by 0.5 percent in 2009, says the Swiss state secretariat for economic affairs (SECO) in its report yesterday 17 June.
Nyon, Vaud
Carouge, Geneva
Switzerland (GenevaLunch) – Good news for Swiss tenants: a majority should be able to ask for a rent reduction as of today, 3 June, according to the Federal Housing Office (FHO) in Bern. The FHO every three months sets the “reference” interest rate to which rents have been indexed since autumn 2008. It has remained at 3.5 percent despite sliding mortgage rents but 2 June for the first time the lower average pushed the reference rate down to 3.25 percent. If a lease is based on a reference rate of 3.50 0r higher, tenants can now ask for a reduction.
Zurich, Switzerland (GenevaLunch) - The Swiss National Bank 12 March announced that it is taking steps to lower the Swiss franc against the euro: it is investing in Swiss franc bonds issued by private borrowers, narrowing the range of the benchmark Libor interest rate to 0-0.75% with immediate effect in order to bring interest rates lower, and it is buyng foreign currency on foreign exchange markets. The Financial Times Friday morning leads with the currency exchange move news, citing several analysts who say Switzerland could be setting off a currency war.
The Bank of England cut its interest rates to 0.5%, the lowest ever and the European Central Bank cut rates for the euro region, to 1.5%, the lowest since the the bank was created 10 years ago and the euro went into circulation. The half-point cuts in the two banks’ benchmark rates could well be followed by more cuts and spending by the banks to restart economic activity, the International Herald Tribune reports. Jean-Claude Trichet, ECB president, said at a press conference Thursday “”We are discussing and studying possible new nonstandard measures,” Trichet said. “I don’t exclude anything.” Bank of England statement, ECB statement
The US Federal Reserve Tuesday cut interest rates from 1% to between 0 and 0.25%, a record low. The Financial Times said it had “moved deeper into uncharted waters.” Bloomberg focused on the Fed buying debt as its next step. The Wall Street Journal says the rate cut “put an exclamation point on a day-long stock rally Tuesday.” The dollar slumped against other currencies.
Basel, Switzerland (romandie/afp, Fre) – Coop Bank is reducing its interest rate on new mortgages, effective immediately, to 2.625%. Existing mortgages will benefit from the change 1 April 2009.
The European Central Bank made “an unprecedented” cut of three-quarters of a point in its main policy rate, to 2.5%, while Britain and Sweden both cut their rates to 2% and New Zealand to 5%. Financial Times
Zurich, Switzerland (GenevaLunch) – The Swiss National Bank Thursday early afternoon lowered its three-month Libor target range to 0.5-1.5%, effective immediately, to increase money market liquidity. The bank noted that with lower costs for oil and raw materials, prices should come under control sooner than earlier predicted, and the central bank now expects inflation to fall below 2% before the end of the year.
The Bank of England “stunned the City and cut the base rate to a 54-year low to fight off recession,” reports The Times, London, saying that the move now puts banks under great pressure to reduce lending rates.
