The Swiss national flag hangs at the Bundeshaus, Switzerland’s parliament building, in Bern, Switzerland, on Thursday, December 13, 2018. The Swiss National Bank lowered its inflation forecast and showed no inclination to back away from its crisis-era stance, citing the strength of the franc and mounting global risks. Photographer: Stefan Wermuth/Bloomberg via Getty Images
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The Swiss National Bank raised its key interest rate by 50 basis points to 1.5% on Thursday.
The policy rate is the fourth consecutive rate hike and the policy rate change is in line with analysts’ expectations.
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The bank said in a press release that the additional tightening of monetary policy had come into effect to “counteract the renewed increase in inflationary pressure”.
Further increases “cannot be ruled out … in order to ensure price stability in the medium term”.
According to a new forecast by the Swiss National Bank, average annual inflation will average 2.6% in 2023 and 2% in 2024 and 2025, with inflation expected to hover at 2.1% by the end of 2025.
The latest rate hike comes as domestic inflation is well above the Swiss National Bank’s target of 0% to 2%.
Swiss inflation rose to 3.4% year-on-year in February, beating analysts’ expectations, although consumer prices are a fraction of the rising rates of the country’s European neighbors.
The country’s interest rates first emerged from negative territory in September after the Swiss central bank surprised markets in June by raising interest rates for the first time since 2007.
The Swiss National Bank had hinted that there could be more rate hikes on the horizon if inflationary pressures persist.
“It cannot be ruled out that the SNB will have to raise key interest rates further in order to ensure price stability in the medium term,” the central bank said in a December press release.
“In order to create appropriate monetary conditions, the SNB is also ready to intervene in the foreign exchange market if necessary,” she added.
The Swiss National Bank took the global spotlight last week after agreeing to lend up to 50 billion Swiss francs ($53.68 billion) to embattled lender Credit Suisse. The lender’s shares had plummeted after it was announced that its biggest investor, the Saudi National Bank, would not provide further financial support.
The resulting liquidity bailout and UBS takeover followed a tumultuous series of scandals and losses for Credit Suisse.