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Swiss Interest Rate Statement

Discussion in 'Economic Indicator Descriptions' started by Felix Homogratus, Dec 7, 2009.

  1. Felix Homogratus

    Felix Homogratus Commander in Chief

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    Swiss interest rate statement decision comes out once every 3 months.

    When the economy in Switzerland is doing well, the flow of money becomes fast, and prices for goods and services start rising. This is called inflation. In order to keep inflation in check, Swiss government raises interest rates, which means for every frank that the banks borrow from the government, they have to pay more.

    The higher the government interest rate, the higher are the bank rates, so it becomes more expensive for people to borrow money for houses, cars, business equipment, et cetera. That cools down the economy and reduces inflation. As soon as the economy is slow, the government tries again to bring it back to normal, so it starts cutting interest rates. This means that people can borrow money from banks cheaper now, and the monthly payments on houses, cars, business equipment, et cetera, become smaller.

    When Switzerland increases interest rates, the demand for the Swiss Franks increases, because people from all over the world start investing into the country’s Certificates of Deposit (CDs). Based on this, traders speculate that the price of USD/CHF will go down.

    Whenever there is an unexpected hike of interest rates, it is usually good for the Swiss Frank, so USD/CHF tends to go down. Whenever there is an unexpected cut or hold of interest rates, it is usually bad for the Swiss Frank, so USD/CHF tends to go up.

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