Surprise, Swiss Central Bank Raises Benchmark Interest Rate for First Time since 2015

BANK Sentral Swiss (SNB), Thursday (16/6/2022) raised its benchmark interest rate for the first time since 2015. The SNB followed the footsteps of a number of central banks from other countries, including the United States Central Bank (The Fed) which raised reference interest rates related to monetary tightening to suppress inflation.

In an announcement that surprised the market, the SNB raised its benchmark interest rate by 0.5 percent or 50 basis points (bps), although the benchmark interest rate remained in negative territory, at minus 0.25 percent.

As quoted by AFP, the Swiss Central Bank also announced that it could not rule out the possibility of further increases in its benchmark interest rate in the future.

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The SNB, like other central banks that have raised their benchmark interest rates in the past two days, is wary of signs of price spikes. In a statement, the SNB said an increase in the benchmark interest rate was needed to control inflation within a range consistent with price stability in the medium term.

Reference interest rates The new SNB takes effect from Friday (17/6/2022).

“To ensure proper monetary conditions, the SNB is also willing to be active in the foreign exchange market if necessary,” said the SNB’s statement, Thursday.

The announcement of the SNB’s monetary move came just a day after the Fed raised its benchmark interest rate aggressively, with the biggest increase in 28 years at 75 bps.

The European Central Bank (ECB) has also announced that it will soon begin a series of benchmark rate hikes starting in July 2022, with the Bank of England (BOE) on Thursday setting its benchmark rate hike for the fifth time in a row.

Analysts acknowledged the SNB’s monetary move as a surprise.

“This is a very hawkish policy swing for the SNB, raising its inflation-fighting credentials in one fell swoop,” Stephen Innes, managing partner at SPI Asset Management, said in a note.

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