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Parnika & Raunika (EDITED FINAL RESPONSE)

React: The Swiss central bank cuts its interest rates to zero. This is a monetary policy where interest rate cuts reduce both the costs of borrowing and benefits of saving. As a result, the incentive to save is lowered and incentive to spend is heightened. Thus, consumption expenditure and investment spending rise, leading to a rightward shift of Aggregate demand. This is an expansionary demand-side policy that leads to higher inflation or sustained increase in prices. This policy is utilised when the rate of inflation is low and too close to deflation. Typically, this would occur if the rate of inflation was lower than 2%.

Anticipate: The first potential change that caused this is how Switzerland has seen a decreasing rate of inflation that, as of 2025, has dipped to -0.1% for the first time in four years. The second potential cause is how Switzerland's low inflation rate and strong fiscal policies drove up demand for the Swiss franc, leading to higher imports and lower prices (which negatively impacts domestic economic growth and increases foreign competition).

Design: The two reasons are connected, as inflation is lower due to the Swiss franc's value, but the Swiss franc's value remains high due to low inflation (which results from strong monetary policies). Unlike monetary policies, fiscal policies involve the government more than the central bank.

Either way, another reason for the Swiss franc's high value is that it is considered a safe haven or a haven currency. This is essentially a currency that is known to retain or see increased value during market turbulence. Other reasons include Switzerland’s low public debt and strong market competition. Further, inflation rates remain low and stable as a result of the Swiss National Bank (SNB) since it extensively prioritizes price stability unlike the central banks of other countries.

There are various impacts to discuss in this scenario. While interest rates have been kept stable by other countries, the Swiss franc's value made that difficult. The government had to depreciate its value without being accused of currency manipulation which made policy-making difficult. Hence, it was easier to intervene indirectly via monetary policy rather than directly.

Furthermore, the Swiss franc's value remains high the lower the inflation, but negative interest rates cannot be implemented. This is due to savers and lenders who lose significantly as a result of this potential change.

Moreover, negative interest rates may lead to soaring values for Swiss property.

However, negative interest rates still occur due to pressure since it impacts market conviction.

Lastly, Swiss banks face the worst side effects as they cannot gain interest on any loans or savings. In the case of a negative rate, banks would rely on deposit funding and take more risks in-order to maintain profits.

Hence, Switzerland has not experimented with negative interest rates in this case.

Transform: The article speaks of only demand-side policies rather than supply-side policies to tackle the issue of low inflation and high appreciation of the Swiss franc. In addition, demand and supply side policies are restricted as only two types of policies when there may be various alternative methods to handle the issue of inflation, making it another assumption. However, political coordination is discouraged as the SNB may lose credibility over such a scenario, resulting in a lack of fiscal policies being implemented.

Nonetheless, the bank also prioritises long-term fixes over political favouritism, which works in making the central bank more reliable for everyday consumers.

Stable prices are also valued over temporary unemployment or reduced exports, with handling inflation being the main priority. It's also seen as better to have mild inflation as compared to deflation due to the fear of deflation that is emphasized by the anxiety instigated from the idea of a lack of money in circulation within an economy and its potential dangers.

The Switzerland government actually aims to depreciate the value of the Swiss franc but can't do so without being seen as a currency manipulator despite its negative effects domestically. Hence, assumptions and expectations from other economies also impact the decisions made by the Swiss government.

In conclusion, policies must be able to support the Swiss franc as a safe haven while weakening it enough to support the economy, thus creating various difficulties for policymakers.

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Parnika & Raunika

React: The Swiss central bank cuts its interest rates to zero. Here, a monetary policy is implemented where reduction in interest rates reduces the costs of borrowing and benefits of saving. As a result, the incentive to save is lowered and incentive to spend is heightened. Thus, consumption expenditure and investment spending rise, leading to a rightward shift of Aggregate demand. This is an expansionary demand-side policy that leads to higher inflation or sustained increase in prices. This policy is utilised when the rate of inflation is low and too close to deflation. Typically, this would occur if the rate of inflation was lower than 2%.

Anticipate: The first potential change that caused this is how Switzerland has been seeing a decreasing rate of inflation and as of 2025, it had dipped to -0.1% for the first time in four years. The second potential cause is how Switzerland's low inflation rate and strong fiscal policies drove up demand for the Swiss franc, leading to higher imports and lower prices (which negatively impacts domestic economic growth and increases foreign competition).

Design: The two reasons are connected, as inflation is lower due to the Swiss franc's value, but the Swiss franc's value remains high due to low inflation (which results from strong monetary policies). Unlike monetary policies, fiscal policies are supply-side and involve the government more than the central bank.

Either way, another reason for the Swiss franc's high value is that it is considered a safe haven or a haven currency. This is essentially a currency that is known to retain or see increased value during market turbulence. Other reasons include Switzerland’s low public debt and strong market competition. Further, the inflation remains low and stable as a result of the Swiss National Bank (SNB) since it extensively prioritizes price stability unlike the central banks of other countries.

There are various impacts to also evaluate in this scenario. While interest rates have been kept stable by other countries, the Swiss franc's value made that difficult. The government had to depreciate its value without being accused of currency manipulation which made policy-making difficult. Hence, it was easier to intervene indirectly via monetary policy rather than directly.

Furthermore, the Swiss franc's value remains high the lower the inflation, but negative interest rates cannot be implemented. This is due to savers and lenders who lose significantly as a result of this potential change.

Moreover, negative interest rates may lead to soaring values for Swiss property.

However, negative interest rates still occur due to pressure since it impacts market conviction.

Lastly, Swiss banks face the worst side effects as they cannot gain interest on any loans or savings. In the case of a negative rate, banks would rely on deposit funding and take more risks in-order to maintain profits.

Hence, Switzerland has not extensively experimented with negative interest rates.

Transform: The article assumes only demand-side policies rather than fiscal policies to tackle with the issue of low inflation and high appreciation of the Swiss franc. In addition, the belief of demand and supply side policies is restricted to only two types when there may be various alternative methods to handle the issue of inflation is also an assumption.

However, political coordination is discouraged as the SNB may lose credibility over such a scenario, resulting in a lack of fiscal policies being implemented. It also prioritises long-term fixes over political favouritism, which works in making the central bank more reliable for everyday consumers.

To add, stable prices are valued over temporary unemployment or reduced exports, with inflation being the main priority. It's also seen as better to have mild inflation as compared to deflation due to the overbearing fear of deflation that is emphasized by the fear instigated from the idea of a lack of money in circulation within the economy.

The Switzerland government actually aims to depreciate the value of the Swiss franc but can't do so without being seen as a currency manipulator despite its negative effects domestically.

In conclusion, policies must support the Swiss franc as a safe haven while weakening it enough to support the economy.

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Pattern:

In recent months, inflation in India has slowed down, with retail prices rising at a much lower rate: just 3.16% in April. At the same time, the country’s economic growth has also declined, dropping from 9.2% to 6.5% over the past year. In response, the Reserve Bank of India has adjusted its approach, moving from an “accommodative” stance to a more “neutral” position, where it carefully balances both inflation and growth. To support the slowing economy, the RBI has been cutting interest rates consistently, making it easier for people and businesses to borrow money and invest.

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Use the link https://www.ft.com/content/42827c57-ce87-45ed-926b-9150d5976020 for analysing

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Use the link https://www.ft.com/content/42827c57-ce87-45ed-926b-9150d5976020 for analysing the situation

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Use the link https://www.bbc.com/news/articles/c62vdq6g945o for analysing the situation

# data[].attributes.body
Use the link https://www.bbc.com/news/articles/c62vdq6g945o for analysing the situation

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Use the link https://www.bbc.com/news/articles/c62vdq6g945o