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The Swiss National Bank’s negative interest rates are essential and a premature tightening would hurt the economy, according to the government.

In a closed-door meeting with leading politicians, representatives of Switzerland’s executive explained why subzero rates are important “despite unwanted side effects.” The formal Von-Wattenwyl talks are conducted twice annually, on a variety of topics.

“Getting rid of the negative rates prematurely would involve a high economic cost,” the government said in a statement released Friday.

The SNB’s deposit rate has been at an ultra-low -0.75% since 2015, and financial institutions blame it for crimping profitability. The Swiss Bankers Association last year campaigned against them, saying they were no longer effective.

The political parties stressed that the “dialog” with the SNB about low interest rates globally and their effect in Switzerland should continue. But the independence of the SNB should be maintained, according to the statement.

The growing skepticism about negative rates isn’t confined to Switzerland. In Germany, European Central Bank policy has been under fire for hurting savers.

To contact the reporter on this story: Catherine Bosley in Zurich at cbosley1@bloomberg.net

To contact the editor responsible for this story: Fergal O'Brien at fobrien@bloomberg.net

©2020 Bloomberg L.P.

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