Rent, mortgage, Swiss franc exchange rate: This means a lower key interest rate

SNB key interest rate: What it’s about

The franc has become significantly stronger. While one euro cost 99 cents in May, it is now only 93.5 cents. Importers and retailers are the beneficiaries. But the Swiss export industry is suffering. It is putting pressure on the Swiss National Bank (SNB) to cut interest rates so that the franc does not continue to appreciate.

Because other central banks in Europe and the USA are also likely to cut interest rates soon, several market observers contacted by 20 Minutes expect a reaction from the SNB, including Karsten Junius, chief economist at Bank J. Safra Sarasin.

However, three steps in the key interest rate are to be expected from the current 1.25 percent to 0.5 percent in March, says Junius. He explains what impact this drop in interest rates will have on everyday life.

Die variable mortgages (Saron) will fall to the same extent as the base rate plus bank surcharge. “People with variable mortgages will then have a clear reduction in interest rates and more financial resources available for other things,” says Junius.

The Fest mortgages are likely to fall in December or March. “It’s not far to the next rounding limit of the mortgage reference interest rate,” says Junius.

Recently, the reference interest rate rose and many landlords were allowed to increase rents. If it falls in the next few months, these tenants can also demand a price reduction again, says Junius.

This is the reference interest rate

Despite a lower base rate, the franc is likely to strengthen even further. Shopping tourists will therefore continue to benefit. “The SNB is likely to ease the upward pressure somewhat, but not prevent it completely,” says Junius. He expects the euro to be worth 92 cents by the end of next year.

A gradual appreciation of the franc is OK. However, if the appreciation were very rapid or strong, there would be competition problems for the Swiss export industry, says Junius. The manufacturing industry has recently had problems due to the economic weakness in Europe and has had to lay off people.

By the end of the year, the unemployment rate will probably rise by another 0.5 percent, but will then fall again due to the interest rate cuts. “Low interest rates are good for the economy, they ease the cost pressure for companies and thus secure jobs,” says Junius.

The overall inflation rate was still at 1.1 percent in August. But the price increase could continue to fall. “We recently had distortions in the inflation rate due to rent increases; prices excluding rent only rose by 0.4 percent,” says Junius.

If rents stop rising or even fall and electricity prices fall, inflation could come dangerously close to the lower limit of the SNB’s inflation corridor of 0 to 2 percent.

Falling interest rates are not good news for savers. “They receive low interest on their savings accounts and on government and corporate bonds,” says Junius.

Do you follow 20 Minutes Economy on Whatsapp?