June 8, 2023

Swiss National Bank (SNB), the central bank of Switzerland.


On Thursday, the Swiss National Bank raised the reference interest rate to 0.5%, a move that brings to an end the era of negative rates in Europe.

The 75 basis point increase follows a hike to -0.25% on June 16, which was the first rate hike in 15 years. Before that, the Swiss central bank had held rates at -0.75 percent since 2015.

It comes after inflation in Switzerland reached 3.5% last month, the highest rate in three decades.

The bank said the increase in the reference rate was “to counter the resurgence of inflationary pressure and the spread of inflation to goods and services that have been less affected so far”.

It added that further increases in the reference rate “cannot be ruled out”.

The rise in prices is in line with economists’ expectations, according to a Reuters poll.

The Swiss franc weakened dramatically against the dollar and the euro after the rate hike. At 9:15 a.m. London time, the dollar was higher by 1.24 percent against the Swiss currency, and the euro by 1.6 percent.

Earlier this week, the Swiss franc hit its strongest level against the euro since January 2015, as economists began to speculate on the prospect of a 75 basis point hike.

Switzerland was the last remaining country in Europe with a negative interest rate, as the region’s central banks aggressively raised rates to tackle rising inflation.

Japan is now the last major economy with a central bank in negative territory, after the Bank of Japan decided keep your interest rates on hold to -0.1% on Thursday.

Denmark, meanwhile, ended its nearly decade-long streak of negative interest rates on September 8 when the central bank raised its benchmark rate by 0.75 percentage points to 0.65%.

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Most recently, Sweden’s central bank increased its interest rate to 1.75% on September 20. The 100 basis point increase came as the Riksbank warned that “inflation is too high”.

The European Central Bank moved above zero when it raised interest rates on September 8 to curb rising inflation.

The ECB may continue to raise rates, but future hikes will not be as drastic as the last hike of 75 basis points on September 9, ECB Governing Council member Edward Scicluna says.

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