A Surprising Return of Negative Interest Rates in Switzerland?

In an era of economic transformations and financial uncertainties, Michel Dominicé, a recognized expert, makes a bold prediction: the imminent return of negative interest rates in Switzerland. This brief preamble aims to position the reader in the context of this surprising statement and to arouse their curiosity about the arguments and issues underlying this controversial perspective.

Introduction

In the world of finance and economics, bold predictions are plentiful. One such recent prediction was made during an event organized by the Association of Real Estate Developers of Vaud (ADIV). Michel Dominicé, senior partner at the eponymous firm, confidently declared: "Even though you might think they belong to the past, negative interest rates will return within one to four years."

I. An Unexpected Return

To understand the impact of this prediction, it is important to recall that in September 2022, the Swiss National Bank (SNB) ended eight years of continuous interest rate cuts. At that time, most economists believed that negative interest rates were a tool of the past. However, Michel Dominicé presents a different and intriguing perspective.

II. The Factors at Play

Why does Michel Dominicé predict a return of negative interest rates? Several factors influence this vision:

1. The Knowledge and Technology Economy

Advances in technology and the rise of the knowledge economy have profoundly altered the global economy, paving the way for new monetary policies.

2. Sustained Decrease in Capital Returns

The decrease in returns on investments is prompting central banks to consider extraordinary measures to support economic growth.

3. The Rising Swiss Franc

Forecasts of a strong appreciation of the Swiss franc could pose a problem for the SNB. However, intervening massively in the foreign exchange markets could be risky, given the SNB's already colossal balance sheet.

III. The Strategy of the Swiss National Bank

If the Swiss franc were to appreciate significantly, the SNB could face a dilemma. With a balance sheet of more than one billion francs, it finds itself in a delicate situation. Inflating its balance sheet indefinitely is not an option, which could force it to use negative interest rates to control the value of the Swiss franc.

Conclusion

Michel Dominicé's prediction regarding the return of negative interest rates in Switzerland is not only bold but also controversial. While his reasons are based on significant economic changes, only time will tell if this prediction comes true. The global economy is influenced by a multitude of complex variables, and monetary policies evolve in response to these changing economic challenges. The future remains uncertain, but the idea of a return to negative interest rates defies current expectations.

**Source :**Le Temps