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The Swiss National Bank raised interest rates as inflationary pressures hit hard

by SuperiorInvest

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

COFFRINI FACTORY | AFP | Getty Images

On Thursday, the Swiss National Bank raised the key interest rate to 0.5%, a move that marks the end of the era of negative rates in Europe.

The increase of 75 basis points follows an increasing to -0.25% on June 16, which was the first rate hike in 15 years. Previously, the Swiss National Bank had held rates at -0.75% since 2015.

It comes after inflation in Switzerland reached 3.5% last month, the highest rate in three decades.

The bank said the hike in the key interest rate was “against a resurgence of inflationary pressures and the spread of inflation to goods and services that have been hit less so far”.

He added that further increases in interest rates “cannot be ruled out”.

The increase is in line with economists’ expectations, according to a Reuters poll.

The Swiss franc weakened dramatically against the dollar and euro after the rate hike. At 9:15 a.m. London time, the dollar was up 1.24% against the Swiss currency and the euro was up 1.6%.

Earlier this week, the Swiss franc hit its strongest level against the euro since January 2015 as economists began speculating on the prospect of a 75 basis point hike.

Switzerland was the last remaining country in Europe with a negative interest rate as the region’s central banks aggressively raised rates to tackle soaring inflation.

Japan is now the last major economy with a central bank in negative territory after the Bank of Japan decided to do so keep your interest rates the same on Thursday to -0.1%.

Denmark, meanwhile, ended its nearly decade-long streak of negative rates on September 8 when the central bank raised its benchmark rate by 0.75 percentage points to 0.65%.

Most recently, the Swedish central bank raised its interest rate to 1.75% on 20 September. The 100 basis point increase came as the Riksbank warned that “inflation is too high”.

European central bank moved above zero when rates increased to combat soaring inflation on 8 September.

The ECB could continue to raise rates, but future hikes will not be as drastic as the last 75 basis point increase on September 9, ECB Governing Council member Edward Scicluna said.

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