Swiss Bank “Goes There”, Applies Negative Rates To Retail Deposits
Back in September in “How Mario Draghi Can Force The Swiss National Bank To Go ‘Nuclear On Depositors,” we discussed the implications of the ECB’s (likely) decision to plunge further into NIRP-dom at the bank’s December meeting.
In short, DM central banks – with the possible exception of the Fed which is about to create a rather meaningful policy divergence with its core CB brethren – are in a proverbial race to bottom. It’s a beggar-thy-neighbor monetary policy regime and the more stubborn inflation expectations prove to be, the more aggressive the tit-for-tat easing, as everyone involved scrambles to protect their currency in the face of incessant competitive devaluations on all sides.
As we outlined in great detail in the post linked above, the ECB’s ultra dovish lean has the potential to create a lot of problems for the Riksbank, the Norges Bank, and the SNB.
Sweden is running out of options for a QE program that’s already broken once (see here and here) and although Stefan Ingves will probably tell you there’s more room to cut in the event Draghi moves on the depo rate, the Riksbank is already at -0.35 and the housing bubble has reached epic proportions. Of course staying on hold in the event of an ECB cut means the krona will soar and then, well, there’s goes any hope of hitting the elusive inflation target.
Norway, on the other hand, can’t even begin to think about QE because frankly, they’re too rich. That is, the Norges Bank wouldn’t have enough assets to buy without breaking the market pretty much immediately. That leaves rate cuts and to be sure, at +0.75 (yes, that’s right, not everyone is in NIRP), there’s probably a bit of breathing room there for Oeystein Olsen and he may need it come next month.
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