In an attempt to safeguard the Swiss franc against skyrocketing value, the Swiss National Bank (SNB) on Wednesday said it would slash already-low interest rates in a move that shocked markets. Investors fearing debt crises in euro zone nations and in the U.S., notwithstanding Tuesday’s action by Congress and the president, have increasingly turned to the Swiss franc as a safe haven in troubled times.
In a Reuters report, SNB said that it would not tolerate the tight monetary conditions brought about by what it characterized as a “massively overvalued” franc. The overvaluation, it said, threatened economic growth and also increased risks on price stability. In a statement, the bank said, “The SNB is keeping a close watch on developments on the foreign exchange market and will take further measures against the strength of the Swiss franc if necessary.”
The Swiss interest rate is already extremely low at 0.25%, but the bank said it would lower it to “as close to zero as possible” and also vastly increase the supply of the currency in the money market in the next few days.