Switzerland hikes interest rates to boost currency

The Swiss National Bank has again raised interest rates, following concerns about the weakness of the Swiss franc against the US dollar and the Euro. The move immediately strengthened the franc against those two currencies.

The Swiss National Bank has again raised interest rates, following concerns about the weakness of the Swiss franc against the US dollar and the Euro. The move immediately strengthened the franc against those two currencies.

The SNB said it was raising its key LIBOR (London Interbank Offered Rate) target range by half a per cent. It now lies at 1.75 to 2.75 per cent.

The range, introduced in December, was previously 1.25 to 2.25 per cent.

“The anticipated economic recovery is continuing,” said the central bank statement. “At the same time the weak trend of the Swiss franc, notably vis-à-vis the US dollar, is leading to an undesirable relaxation of monetary conditions in Switzerland.”

“This poses a threat to price stability,” continued the statement. “By increasing the target range, the National Bank aims to counteract such a risk.”

The SNB said it aimed to keep the LIBOR rate in the middle of the target range for now.

The rate rise had been widely anticipated after a decision two weeks ago to aim towards the upper end of the LIBOR rate failed to stem losses against the US currency. In the past week, the franc fell to its lowest level against the dollar for a decade, tracking the Euro’s plunge.

The rise came shortly after the European Central Bank in Frankfurt decided to hike Euroland’s interest rates by a quarter per cent to 3.25 per cent.

That decision in turn followed Wednesday’s quarter point increase by the United States Federal Reserve.

By Michael Hollingdale