- The break ended the SNB’s streak of five consecutive hikes since it began raising interest rates out of negative territory in June 2022, leaving its benchmark interest rate at 1.75%.
- “The significant tightening of monetary policy in recent quarters is counteracting the remaining inflationary pressure,” the SNB said in a statement.
A logo of the Swiss National Bank is pictured on the SNB building in Bern, Switzerland, on May 20, 2020.
Arnd Wiegmann | Portal
The Swiss National Bank ended its streak of five consecutive rate hikes and left interest rates unchanged at its quarterly monetary policy meeting on Thursday.
The bank, which began raising interest rates from negative territory in June 2022, kept its key rate stable at 1.75%.
“The significant tightening of monetary policy in recent quarters is counteracting the remaining inflationary pressure,” the SNB said in a statement.
“From today’s perspective, it cannot be ruled out that further tightening of monetary policy may be necessary to ensure price stability in the medium term.”
Inflation in Switzerland was at an annual 1.6% in August, well below the central bank’s 2% target. It is well below the inflation rate elsewhere in the country – overall inflation across the euro zone was 5.3% last month.
The Swiss franc was also the best-performing G10 currency this year while the Swiss economy stagnated in the second quarter, suggesting this could be the SNB’s last rate hike of the cycle.
The Swiss Market Index was the only blue-chip stock index in Europe to trade in positive territory on Thursday morning, gaining 0.4% in the hour after the SNB’s decision to keep interest rates on hold.
Speaking to CNBC after the decision on Thursday, SNB Governor Thomas Jordan stressed that “the war on inflation is not over yet” and that policymakers are closely monitoring the situation and further tightening is possible at the December meeting.
At its last meeting in June, the central bank decided on a hike of 25 basis points, following previous increases of up to 75 basis points.
The SNB noted that the growth outlook for the global economy “remains subdued” in the coming quarters, although inflation “is expected to remain elevated globally for the time being.”
“In the medium term, however, levels are likely to return to more moderate levels, not least due to more restrictive monetary policy,” the central bank said.
However, the SNB noted that a “significant slowdown in the global economy” could not be ruled out given persistently high inflation in other parts of the world, which could require further tightening of monetary policy by some central banks. In its commentary, the SNB also took into account a possible deterioration in the energy situation in Europe over the winter.
The central bank cited this expected slowdown as a key risk for the Swiss economy, which is expected to grow by around 1% this year as unemployment continues to rise slightly and production capacity utilization falls.