By John Reville and Silke Koltrowitz
ZURICH (Reuters) – The Swiss National Bank raised its policy rate by 0.75 percentage points on Thursday – just the second rate hike in 15 years – and said it would not rule out further rate hikes as it joins other central banks to tighten monetary policy to curb inflation.
The Swiss National Bank raised its policy rate to 0.5% from the negative 0.25% level set in June. Previously, Swiss interest rates had been frozen at minus 0.15% for years as the SNB tried to curb the rise in the safe-haven Swiss franc.
Most economists polled by Reuters had expected the SNB to raise its policy rate to 0.5 percent.
“It cannot be ruled out that further increases in the SNB’s policy rate will be necessary to ensure price stability in the medium term,” SNB President Thomas Jordan told a news conference.
The Swiss National Bank is also ready to be active in the foreign exchange market, he added. Jordan said that meant the central bank would buy foreign currency to control the “excessive appreciation” of the Swiss franc.
“However, if the Swiss franc weakens, we will consider selling FX,” Jordan said.
Swiss government bond yields fell, after an initial surge, while the franc fell broadly against the dollar, euro and pound.
Jordan noted that the franc has risen about 7 percent since the Swiss National Bank last raised interest rates in June, a development that has helped keep inflation in check in Switzerland.
The Swiss National Bank’s decision to raise interest rates comes on the heels of rising prices in Switzerland and hawkish moves by other central banks to try to contain a pick-up in inflation caused by soaring energy costs, a tight labor market and supply chain bottlenecks.
The Federal Reserve on Wednesday raised its benchmark interest rate by a further 75 basis points, the third in a row, while the Bank of England also expected a rate hike later on Thursday. Rate hike 50 basis points.
The European Central Bank also raised its deposit rate by
basis points this month, and pledged to raise rates further to tackle rising inflation, which has been at It reached 9.1% in August.
Although inflation in Switzerland remained muted by comparison, it reached a higher-than-expected 3.5% in August, surpassing the SNB’s 0-2% target range for the seventh consecutive month and also since August The highest level since the month 1993.
SNB Governing Council member Andrea Maechler said the SNB will use SNB bills and repo transactions to absorb liquidity to ensure that short-term money market rates remain close to the current positive policy rate. It also introduced tiered remuneration for banks’ checking deposits held with the SNB.
Karsten Junius, an economist at J.Safra Sarasin, said the SNB’s rate hike was accompanied by a more dovish message about further rate hikes compared to messages from other central banks.
“The SNB said it ‘does not rule out the need for a further increase in the SNB’s policy rate’, while all other central banks more or less announced continued tightening,” He says.
“The SNB’s wording plus inflation forecasts remain below 2% in 2024 (in Q2 2025 again suggesting that the SNB is not too Another 75 rate hike may be planned in December. At this stage we will consider 50 bp most likely.”