Swiss National Bank raises interest rates to fight inflation

The Swiss National Bank raised interest rates for the first time in 15 years on Thursday, following other central banks’ policy of tightening monetary policy to fight inflation, which boosted the franc sharply.

The central bank raised the discount rate to -0.25% from the -0.75% level it has set since 2015. This increase was the first SNB increase since September 2007.

The move comes after a 0.75% rate hike by the US Federal Reserve, while the European Central Bank plans to raise rates in July to curb eurozone inflation, which hit 8.1% last month.

“The tighter monetary policy is aimed at preventing inflation from spreading more broadly to goods and services in Switzerland. 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,” it said in a statement.

“To ensure appropriate monetary conditions, the SNB is also willing to be active in the foreign exchange market as necessary.”

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The strength of the stable franc cushioned the impact of inflation in Switzerland by dampening rising fuel prices and food imports.

However, the SNB forecasts inflation to rise to 2.8% for 2022 from 2.1% it gave in March. He also expects inflation to be 1.9% and 1.6% in 2023 and 2024, compared to the previous forecast of 0.9% price growth in both years.

The SNB still expects the Swiss economy to grow by around 2.5% in 2022.