Swiss National Bank raises interest rates to 0.5% to cool inflation

Swiss National Bank raises interest rates to 0.5% to cool inflation

By Scott Kanosky – It raised its policy rate to positive territory for the first time since 2014 on Wednesday in an effort to cool inflationary pressures, and said additional increases “cannot be ruled out” in the medium term.

The Swiss National Bank raised borrowing costs by 75 basis points to 0.5%, up from the previous -0.25% set in June and in line with economists’ estimates. The decision ends an eight-year era of negative interest rates in Switzerland, which SNB policy makers previously said would help stem the Swiss franc’s appreciation.

The central bank also indicated that consumer price growth in Switzerland is likely to remain high β€œfor now” despite being relatively weak compared to its European neighbors at 3.5% in August. The Swiss Central Bank forecast average annual inflation to reach 3% in 2022 before declining to 2.4% in 2023 and 1.7% in 2024.

“Without the SNB’s policy rate hike today, inflation expectations would be much higher,” she said.

Meanwhile, the Swiss National Bank cut its overall annual growth forecast for Switzerland by about half a percentage point to 2%, adding that the short-term outlook has deteriorated. He warned that the uncertainty surrounding this estimate is high, as risks persist from a possible global economic downturn, gas shortages in Europe, reduced energy supplies to Switzerland, and a resurgence of Covid-19 cases.

Weakness of the Swiss franc against each of the following announcement.

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