Swiss perspectives in 10 languages

Swiss National Bank raises interest rates in surprise move

Swiss National Bank
"It cannot be ruled out that further increases in the SNB policy rate will be necessary in the foreseeable future,” the SNB said on Thursday. Keystone / Anthony Anex

Switzerland’s central bank has raised interest rates for the first time in 15 years (by half a percent), in a bid to prevent inflationary pressures on the Swiss economy.

The Swiss National Bank (SNB) said on Thursday that its benchmark rate would rise from -0.75% to -0.25%. The hike was the first increase by the SNB since September 2007. Interest rates remain in negative – part of the SNB’s longstanding effort to keep control of the appreciation of the Swiss franc.

“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,” it said in a statementExternal link on Thursday.

The SNB said it would continue to monitor the value of the franc, and was prepared to intervene in the foreign exchange market to keep control of the country’s currency.

The franc strenthened against other currencies on news of the interest rate change.

The Swiss move followed a 0.75% rate hike by the US Federal Reserve on Wednesday while the European Central Bank signalled last week it would raise its rates in July to check surging inflation in the eurozone which hit 8.1% last month.

The Bank of England on Thursday raised rates by a quarter of a percent to 1.25%.

Swiss inflation


Inflation touched 2.9% in Switzerland in May and the SNB has raised its full-year forecast to 2.8% – up from the 2.1% estimate given in March. prices are then expected to rise by 1.9% next year (0.9% forecast in March) and 1.6% (0.9%) in 2024. 

The central bank said that without today’s interest rate increase, the forecast pointed to a significant further rise in inflation over the coming months.

The safe-haven franc’s overall strength has dampened the impact of inflation in Switzerland by reducing price rises for fuel and food imports.

SNB governing board member Fritz Zurbrügg cautioned that rising interest rates could increase the risk of mortgage loan defaults. Market simulations suggest most banks are well positioned to cope with this problem, but that “capital ratios of certain banks could decline significantly and approach, or even fall below, the regulatory minimum requirements.”

Earlier this year, the government reactivated a countercyclical buffer mechanism, forcing banks to cushion potential mortgage loan losses with greater reserves.

SNB figures show that outstanding mortgage loans increased 3.4% to reach CHF1.13 trillion  ($1.13 trillion) in Switzerland last year.

The SNB said the overall economic outlook for Switzerland remained positive. It forecasts low unemployment, and a 2.5% rise in gross domestic product this year. The war in Ukraine and global energy crisis are unlikely to have a significant impact, it said.

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

Popular Stories

Most Discussed

News

The data also show a slight increase in the proportion of overweight conscripts, reflecting a broader societal trend, according to the army.

More

Majority of young Swiss well-trained, army fitness test reveals

This content was published on More than half of young Swiss men and women are considered well-trained, with around 80% meeting the federal government's exercise recommendations, according to the Armed Forces 2023 fitness test.

Read more: Majority of young Swiss well-trained, army fitness test reveals
Italian voters lead political discussions while playing cards, ahead of the elections for the center-left coalition primary elections in Italy, Sunday, October 16, 2005 in the Casa Italia in Zurich, Switzerland.

More

Italian consulate to relocate to ‘Casa d’Italia’ in Zurich

This content was published on The Italian state is renovating the "Casa d'Italia" in Zurich's Kreis 4 district, with plans to move the Consulate General from its current location on Tödistrasse in District 2 to this historic building.

Read more: Italian consulate to relocate to ‘Casa d’Italia’ in Zurich
A man cleans up the remains of a blown up ATM at the Blitz Garage Volketswil, Wednesday, Dec. 22, 2021 in Volketswil.

More

ATM explosion rocks canton Vaud

This content was published on Unknown assailants detonated an ATM in canton Vaud early Sunday morning, causing extensive damage to the building. The perpetrators fled the scene and remain at large.

Read more: ATM explosion rocks canton Vaud
Lake Parade in Geneva attracts over 100,000 people

More

Lake Parade in Geneva attracts over 100,000 people

This content was published on The 22nd Lake Parade and the Lake Sensation in Geneva attracted over 100,000 people in summery weather on Saturday. There were no major incidents at either event.

Read more: Lake Parade in Geneva attracts over 100,000 people

In compliance with the JTI standards

More: SWI swissinfo.ch certified by the Journalism Trust Initiative

You can find an overview of ongoing debates with our journalists here . Please join us!

If you want to start a conversation about a topic raised in this article or want to report factual errors, email us at english@swissinfo.ch.

SWI swissinfo.ch - a branch of Swiss Broadcasting Corporation SRG SSR

SWI swissinfo.ch - a branch of Swiss Broadcasting Corporation SRG SSR