The Swiss central bank raises the interest rate in the face of the strong blow of inflationary pressures

The Swiss central bank raises the interest rate in the face of the strong blow of inflationary pressures

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

COFFRINI FABRIC | AFP | fake images

The Swiss National Bank on Thursday raised its benchmark interest rate to 0.5%, a change that ends an era of negative rates in Europe.

The 75 basis point increase follows a -0.25% rise on June 16, which was the first rate increase in 15 years. Prior to this, the Swiss central bank had held rates steady at -0.75% since 2015.

It comes after inflation in Switzerland hit 3.5% last month, its highest rate in three decades.

The bank said raising the policy rate was “countering the renewed rise in inflationary pressure and the spread of inflation to goods and services that have so far been less affected.”

He added that further increases in the policy rate “cannot be ruled out.”

The rise is in line with economists’ expectations, according to a Reuters poll.

The Swiss franc weakened sharply against the dollar and the euro after the rate hike. As of 9:15am London time, the dollar was up 1.24% against the Swiss currency and the euro was up 1.6%.

Earlier this week, the Swiss franc reached its highest level against the euro since January 2015, when economists began to speculate on the prospect of a 75 basis point rise.

Switzerland had been the last remaining country in Europe with a negative policy rate, as the region’s central banks have been aggressively raising rates to tackle runaway inflation.

Japan is now the last major economy with a central bank in negative territory, after the Bank of Japan decided to keep interest rates at -0.1% on Thursday.

Meanwhile, Denmark ended its nearly decade-long streak of negative rates on September 8 when the central bank raised its benchmark rate by 0.75 percentage point to 0.65%.

More recently, Sweden’s central bank raised its interest rate to 1.75% on September 20. The 100 basis point increase came as the Riksbank warned that “inflation is too high”.

The European Central Bank moved above zero when it raised rates to combat runaway inflation on September 8.

The ECB could continue to raise rates, but future increases will not be as drastic as the most recent increase of 75 basis points on September 9, according to ECB Governing Council member Edward Scicluna.

Leave a Comment

Your email address will not be published.