The Swiss franc is sinking against the U.S. dollar after Swiss National Bank governor Thomas Moser said the Bank is “open” to negative interest rates, reports The Wall Street Journal.
WSJ’s Todd Buell reported Wednesday that Moser told the paper at an academic conference in Hamburg: “We have always said [negative rates] is a possibility… We’re never shy about it…we always said we would use it if needed.”
Moser’s comments come after the European Central Bank last week announced further rate cuts, taking its deposit facility interest rate to -0.2%.
The use of negative interest rates by a central bank is a unconventional tactic aimed at boosting bank lending in an effort to jumpstart the economy. The basic idea is that if a central bank charges interests, rather than pays interest, on reserves held at the bank, then depositors would be more likely to lend money out than keep it parked in an account it has to pay for.
In morning trade on Wednesday, Moser’s comments sent the U.S. dollar to new highs against the franc, with one dollar now buying abut 0.9377 francs.
The euro also rallied against the franc following reports of Moser’s comments.