Swiss central bank hikes interest rates by 50 basis points to counter ‘further spread of inflation’

The Swiss National Bank raises its interest rates again.

FABRICE COFFRINI/Contributor/Getty Images

The Swiss National Bank on Thursday raised its key rate for the third time this year, bringing it to 1%.

The central bank said it was seeking to counter “increased inflationary pressure and further spread of inflation” with the move.

Inflation in the country remains well above the Swiss National Bank’s 0-2% target, but is significantly below the surge rate of neighboring European countries. Switzerland’s inflation rate held steady at 3% last month, after falling from a three-decade high of 3.5% in August.

The central bank’s 50 basis point hike on Thursday came after an unexpected hike in its key rate for the first time in 15 years in June, taking it from -0.75% to -0.25%. So entered positive territory with an increase of 75 basis points on September 22.

And there might be more hikes on the horizon.

“It cannot be ruled out that further hikes in the SNB’s key interest rate will be necessary to ensure price stability in the medium term,” said a press release from the central bank.

“To provide appropriate monetary conditions, the SNB is also willing to be active in the foreign exchange market if necessary,” he added.

Global slowdown

In announcing its latest rate hike, the Swiss National Bank noted the global slowdown in growth and that inflation is “significantly above” central bank targets in many countries – and it does not expect that this is changing so soon.

“The SNB expects this difficult situation to persist for the time being. Global economic growth is expected to be weak in the coming quarters and inflation will remain high for the time being,” the press release said.

Over the medium term, however, the bank expects inflation to stabilize at more subdued levels as countries continue to tighten monetary policy.

Charlotte de Montpellier, senior economist at ING, noted that the Swiss National Bank’s total increase of 175 basis points in 2022 compares to an expected increase of 250 basis points in the euro zone and a Rise of 425 basis points in the United States.

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