Dhe Swiss National Bank (SNB) is surprisingly raising interest rates after more than seven years of monetary policy persistence. The key interest rate and interest on sight deposits at the central bank will be minus 0.25 percent from June 17, 2022, as the SNB announced on Thursday. Since January 2015, the rates have been minus 0.75 percent.
The National Bank is tightening monetary policy to counteract the increased inflationary pressure, the SNB said. “The tighter monetary policy is intended to prevent inflation in Switzerland spreading more widely to goods and services.”
According to the central bank, it cannot be ruled out that further interest rate hikes will be necessary in the foreseeable future in order to stabilize inflation in the medium term. In order to ensure appropriate monetary conditions, the SNB is also prepared to be active in the foreign exchange market if necessary.
Most of the economists surveyed by Reuters in the run-up to the SNB’s quarterly monetary policy assessment had forecast unchanged interest rates. After the interest rate decision, the euro lost significantly against the Swiss franc. The recovery of the German stock market also faltered as a result.
At their meeting in Bern, the monetary authorities, led by SNB President Thomas Jordan, decided to raise the key interest rate by 50 basis points to -0.25 percent. The decision had divided investors and economists in advance: the financial markets were pricing in an increase, while the forecasters were expecting no change.
Only a few hours after the US Federal Reserve intensified its fight against runaway inflation with an interest rate hike of 75 basis points, the SNB, one of the last holdouts from the developed economies, is joining the global consensus on tightening.
