Switzerland stunned global financial markets Thursday, slashing its official interest rate to -0.75% and abandoning its attempts to cap the franc’s exchange rate against the euro, against a broader backdrop of central bank alarm at the slowing world economy.
The Swiss National Bank’s move is nothing short of a revolution in the world of finance: no central bank has ever set its official interest so low. In pushing rates so far into negative territory, it is consciously destroying the value of investments in the franc in an effort to scare off ‘hot money’ that has flooded the country in search of a ‘safe haven’ from turbulent global markets.
Such flows have been the bane of Switzerland since the start of the Eurozone debt crisis in 2010, pushing the franc up to a level that makes life near-impossible for the Swiss economy.
But the SNB’s move is also part of a…
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