The low interest rate environment is also bolstering momentum on the real estate markets. However, with all of these problems it is not so much the negative interest rate itself that is a major factor, but rather the exceptionally low level of interest rates that has prevailed worldwide for years, and which I referred to at the beginning of my speech. These challenges did not appear only when the SNB started charging negative interest, but rather reflect the protracted decline in global interest rates. In the current situation, interest rates would remain low even if we were to stop charging negative interest, and the knock-on effects would thus also persist. Page 5/8  Safeguarding Switzerland Ladies and Gentlemen, would the citizens of Switzerland be better off if the SNB did not impose its negative interest rate? Allow me to play through a brief scenario in this regard. What would happen if we were to simply stop charging negative interest in the current environment? Dispensing with the negative interest rate would have a substantial impact on the Swiss economy. Swiss short-term interest rates would again be higher than in other countries, which would clearly increase the attractiveness of Swiss franc investments. This is turn would cause the franc to appreciate, which would be detrimental to economic momentum in Switzerland and would see unemployment rise and inflation pushed into negative territory. If we stopped charging negative interest, would that at least be beneficial for savers, pension funds, life insurers and banks?
From mid-2014 onwards, the international monetary policy environment began to change. On the one hand there were increasingly clearer signs that the US was about to adopt a tightening stance, whereas in the euro area a loosening of monetary policy was becoming more and more likely. The euro subsequently depreciated markedly against the major currencies. As a result, by the beginning of 2015 the minimum exchange rate was no longer sustainable. To retain control over our monetary policy, we therefore decided in January 2015 to change tack. In that exceptional situation, we had to weigh up the pros and cons of using alternative unconventional instruments. It became apparent that we would have to lower interest rates below zero given that various other central banks had already done so. This was the only way we could limit the appeal of the Swiss franc. When we discontinued the minimum exchange rate, we thus also imposed negative interest of –0.75% on banks’ sight deposits held at the SNB. This then brought the level of interest rates in Switzerland back down below that in other countries. Coupled with our willingness to intervene in the foreign exchange market as necessary, the negative interest rate has taken the pressure off the Swiss franc and prevented a sharp drop in inflation.