Swiss National Bank Interest Rate Hiked by 50 Basis Points

June 22, 2022

The quarterly review of the Swiss National Bank’s monetary policy ended with an unexpected 50-basis point increase of the policy interest rate to -0.25%. The rate had been at -0.75% since January 2015, and this was the first increase since 2007. A released statement opines that more rate hikes are likely and reaffirms the practice of intervening as needed to counter upward pressure on the overvalued Swiss franc. Interest rate hikes are “aimed at preventing inflation from spreading more broadly to goods and services in Switzerland.” Officials conceded that even with this shift to a less accommodative stance, inflation will significantly exceed previous expectations. CPI inflation is projected now to crest at 3.2% next quarter instead of the previous estimate of 2.1% then. Even in the third quarter of 2023, they now expect inflation to be at 1.5%, not the prior forecast of 0.7%, and inflation is seen accelerating in the final year of the forecast horizon and, at 2.1% in 1Q 2025, exceeding target.

Copyright 2022, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

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