The Swiss National Bank (SNB) moved interest rates half a per cent higher. At its twice yearly policy presentation, the SNB increased the target range for the three month Swiss franc LIBOR, from a range of 2.5-3.5 per cent to 3.0-4.0 per cent.
The expected increase should help the Swiss economy stem a risk of inflation as the domestic economy continues to boom. First quarter economic growth in Switzerland came in at a high of four per cent year-on-year, with the unemployment rate falling to 1.9 per cent - an eight year low.
This latest move by the SNB, follows a similar increase by the European Central Bank last week, and will help maintain one of its key objectives, which is a stable swiss franc-euro exchange rate. The SNB last moved its target range for interest rates higher March 23.
Analysts also expect that this latest move could result in higher mortgage rates for homeowners in Switzerland. This in turn will probably mean increases in rents across the country.
The SNB also forecast economic growth at three per cent in 2000, and warned that despite today's rise in interest rates inflation would still probably push above two per cent in 2001.
However the bank did say that inflation should again fall below two per cent in 2002 and 2003.
by Tom O'Brien