Swiss National Bank unexpectedly hikes rates by half a point

Swiss National Bank unexpectedly hikes rates by half a point

Swiss National Bank (SNB), the central bank of Switzerland.


The Swiss National Bank on Thursday raised interest rates for the first time in 15 years, joining other central banks in tightening monetary policy to combat resurgent inflation and sending the safe-haven franc sharply higher.

The central bank raised its key interest rate from -0.75% since 2015 to -0.25%. The increase was the SNB’s first increase since September 2007.

The move followed a 0.75% interest rate hike by the US Federal Reserve on Wednesday, while the European Central Bank signaled last week that it would hike rates in July in a bid to control rising euro-zone inflation, which lasted 8 months reached 1%.

“The tighter monetary policy is intended to prevent inflation from spreading more widely to goods and services in Switzerland. It cannot be ruled out that further increases in the SNB’s key interest rate will be necessary in the foreseeable future in order to stabilize inflation within a price-tolerable range,” it said in a statement.

“In order to ensure appropriate monetary framework conditions, the SNB is willing to become active on the foreign exchange market if necessary.”

The strength of the franc as a safe haven has dampened the impact of inflation in Switzerland by reducing fuel and food import price hikes.

Nevertheless, the SNB raised its inflation forecast for 2022 to 2.8% from 2.1% in March. It also expects inflation to be 1.9% and 1.6% in 2023 and 2024, up from its previous forecast of 0.9% price increases in both years.

For 2022, the SNB continues to expect the Swiss economy to grow by around 2.5%.