Swiss National Bank raises interest rates by 50 points


The Swiss National Bank (SNB) raised its policy rate on Thursday for the first time in 15 years to combat inflation. The policy hike will take effect on June 17.

“SNB is tightening monetary policy, raising SNB’s policy rate and SNB’s site deposit rate by 0.5 percentage points to -0.25 percent to counter rising inflationary pressure. Is aimed at preventing the spread of Swiss goods and services. ” press release..

“It is undeniable that the SNB’s policy rate needs to be raised further in the near future in order to stabilize inflation to the extent that it is consistent with medium-term price stability.”

Inflation reached 2.9% in May. SNB expects inflation to remain high “for the time being”. Swiss banks forecast inflation rates of 2.8 percent in 2022, 1.9 percent in 2023 and 1.6 percent in 2024. Inflation forecasts would have been “significantly higher” if the SNB had not announced a 50 basis point increase in the policy rate.

According to SNB, global growth is hampered by high inflation, the war in Ukraine, and the blockade of COVID-19 in China. Banks have calculated that energy prices will remain high for now, but “serious energy shortages” in major economic regions are not expected. As a result, positive economic development “should continue overall.”

Switzerland’s GDP rose by less than 2% in the first quarter of 2022, following moderate growth in the previous quarter. The bank said the signal for the quarter remained “positive,” adding that the labor market is also improving.

SNB predicts that 2022 GDP will be around 2.5% and unemployment “is likely to remain low” unless the global economy grows and the war in Ukraine expands further. I am.

The SNB decision came after the European Central Bank (ECB) announced last week that it would raise interest rates by 25 basis points in July for the first time in 11 years. According to the ECB, a significant rate hike in September could continue if necessary.

The announcement worried investors and plunged in the European bond market. The ECB then convened an emergency meeting on June 15 to promise new tools to address the potential risks of eurozone bond fragmentation.

The ECB had already significantly reduced its growth forecast for the year. Banks expect the region to grow at 2.8% in 2022, compared to the previous forecast of 3.7%. Inflation is expected to rise from 5.1%, which banks had previously predicted, to 6.8%.

Meanwhile, the Federal Reserve raised the benchmark interest rate by 75 basis points on June 15 as part of controlling inflation. This is the largest rate hike since November 1994. Inflation in the United States for the 12 months of May was 8.6%, the highest increase since 1981.

Naveen Athrappully

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Naveen Athrappully is a news reporter on business and global events in The Epoch Times.

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