Swiss Central Bank Hikes Rate For First Time Since 2007
16 June 2022 - 4:52PM
RTTF2
The Swiss National Bank on Thursday raised its key interest rate
unexpectedly for the first time since 2007, joining its peers in
the battle against runaway inflation.
The central bank raised the SNB policy rate and the interest
rate on sight deposits at the SNB by half a percentage point to
-0.25 percent from -0.75 percent.
"It cannot be ruled out that further increases in the SNB policy
rate will be necessary in the foreseeable future to stabilize
inflation in the range consistent with price stability over the
medium term," the bank said in the statement.
The SNB's surprise move came after the major central banks
around the globe moved towards tightening. The U.S. Federal Reserve
on Wednesday raised the target rate for the federal funds rate by
75 basis points to 1.50 percent to 1.75 percent, which was the
biggest rate hike since 1994. The ECB last week announced its
intention to hike the rate by a quarter point in July.
The SNB said it is willing to be active in the foreign exchange
market as necessary, adding that it does no longer consider the
Swiss franc as highly valued.
SNB President Thomas Jordan said the rate was raised as there
are now signs of inflation also spreading to goods and services
that are not directly affected by the war in Ukraine and the
consequences of the pandemic.
Given its history of unscheduled announcements, it is more
likely than not that the Bank will raise rates again, to zero or
even into positive territory, before the next scheduled meeting, in
September, Capital Economics economist David Oxley said.
Raising rates now means that the SNB does not have to rush into
major rate hikes later on and retains the initiative, ING
economists said.
This gives the SNB room to manoeuvre in deciding what to do in
September, depending on data developments and the global economic
and geopolitical situation, they added.
The central bank also adjusted the threshold factor used to
calculate the level of banks' sight deposits at the SNB exempt from
negative interest.
The SNB raised its inflation forecast, citing global factors.
The inflation projection for this year was raised to 2.8 percent
from 2.1 percent.
Similarly, the forecast for 2023 was lifted to 1.9 percent and
that for 2024 to 1.6 percent, from 0.9 percent estimated for both
2023 and 2024.
In May, inflation rose to 2.9 percent, the highest since
September 2008. The main reason for the higher inflation was the
surge in prices of oil products, food and goods affected by the
global supply bottlenecks.
The war in Ukraine had comparatively little adverse impact on
economic activity in Switzerland. For 2022, the SNB forecast GDP
growth of around 2.5 percent.
Regarding the property market, the SNB said mortgage lending and
residential property prices increased further in recent quarters.
The SNB will continue to monitor developments on the mortgage and
real estate markets closely.
Euro vs Sterling (FX:EURGBP)
Forex Chart
From Mar 2024 to Apr 2024
Euro vs Sterling (FX:EURGBP)
Forex Chart
From Apr 2023 to Apr 2024