July 4, 2022

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Swiss National Bank raises interest rates by half a point, franc rises

Swiss National Bank raises interest rates by half a point, franc rises

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

Cloth Coverini | Agence France-Presse | Getty Images

The Swiss National Bank raised its policy rate for the first time in 15 years on Thursday, joining other central banks in tightening monetary policy to fight rising inflation and send the safe-haven franc soaring.

The central bank raised the interest rate to -0.25% from -0.75% it has used since 2015. The increase was the first increase by the Swiss National Bank since September 2007.

The move came on the heels of the US Federal Reserve’s 0.75% rate hike on Wednesday while the European Central Bank indicated last week that it would raise interest rates in July to stem a spike in eurozone inflation that hit 8.1% last month.

“Tighter monetary policy is aimed at preventing inflation from spreading more widely to Switzerland’s goods and services. It cannot be excluded that additional SNB policy rate increases will be necessary for the foreseeable future to stabilize inflation in the price-consistent range,” she said in a statement. .

“To ensure adequate monetary conditions, the Swiss National Bank is also prepared to be active in the foreign exchange market as necessary.”

The strength of the safe-haven franc has reduced the impact of inflation in Switzerland by limiting the rise in the price of imported fuel and food.

However, the Swiss National Bank raised its inflation forecast for 2022 to 2.8% from 2.1% it provided in March. It also forecasts 1.9% and 1.6% inflation in 2023 and 2024, up from its previous view of 0.9% price hikes in both years.

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The Swiss National Bank still expects the Swiss economy to grow by about 2.5% in 2022.