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

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

FABRICE COFRINI | AFP | Getty Images

The Swiss National Bank raised its policy interest rate on Thursday for the first time in 15 years, along with other central banks, tightened monetary policy to combat inflation and sharply raised the safe franc.

The central bank has raised its policy rate from -0.75% to -0.25% since 2015. This is SNB’s first increase since September 2007.

The move follows a 0.75% rise in the US Federal Reserve on Wednesday, with the European Central Bank signaling that it will raise its rates in July to check rising inflation in the euro, which hit 8.1% last week.

“Tight monetary policy aims to prevent the widespread spread of inflation to goods and services in Switzerland. It cannot be ruled out that a further increase in the SNB policy rate will be necessary to keep inflation in line with prices in the future. Stability in the medium term,” it said in a statement.

“SNB is ready to operate in the forex market to ensure adequate monetary conditions.”

The strength of the safe haven franc has eased the impact of inflation in Switzerland by reducing rising prices for fuel and food imports.

However, the SNB raised its inflation forecast for 2022 to 2.8% from 2.1% in March. It expects inflation to be 1.9% and 1.6% in 2023 and 2024, respectively, with prices rising by 0.9% in both years.

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

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