Swiss interest rates unchanged despite rising franc

The central bank describes the Swiss franc as 'highly valued' © Keystone / Gaetan Bally

The Swiss National Bank (SNB) kept its ultra-expansive monetary policy on hold on Thursday, bucking the trend of other central banks which have started hiking interest rates to tackle rising inflation.

The SNB kept its policy rate locked at -0.75%, as unanimously forecast by economists in a Reuters poll, as well as its commitment to conduct currency interventions to stem the rise of the safe-haven Swiss franc.

The central bank also kept its description of the franc as “highly valued”, the same wording it has deployed since September 2017, despite the currency recently hitting its highest level against the euro in seven years.

“Russia’s invasion of Ukraine has led to a strong increase in uncertainty worldwide. Against this backdrop, the SNB with its monetary policy is ensuring price stability and supporting the Swiss economy,” the bank said in a statementExternal link.

Inflation had risen again in recent months, and stood at 2.2% in February, the SNB said. “This is primarily due to the significant increase in the prices for oil products and goods affected by supply bottlenecks. The tight situation with regard to these products and goods is likely to persist in the coming months owing to the war in Ukraine.”

The SNB expects Swiss inflation for the whole year to hit 2.1% – more than double its 1% prognosis made in December.

Last week the US Federal Reserve hiked interest rates by a quarter of a percentage point in an effort to tame inflation at 40-year highs. It was the first hike in three years, and the Fed also signalled that more rate increases were coming.