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Swiss central bank raises interest rates as inflation pressure hits hard


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

FABRICE COFFRINI | AFP | beautiful pictures

The Swiss National Bank on Thursday raised its benchmark interest rate to 0.5%, a change that ended the era of negative rates in Europe.

75 basis point increase followed increased to -0.25% on June 16This is the first rate hike in 15 years. Previously, the Swiss central bank had kept interest rates steady at -0.75% since 2015.

It comes after inflation in Switzerland hit 3.5% last month – the highest level in three decades.

The bank said the hike in the policy rate was “aimed at countering a new increase in inflationary pressures and the spread of inflation to so far less affected goods and services.”

It added that further hikes in policy rates “cannot be ruled out.”

According to a Reuters poll.

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

Earlier this week, the Swiss franc hit its strongest level against the euro since January 2015, when economists began speculating on the prospect of a 75 basis point increase.

Switzerland is the last country left in Europe to have a negative interest rate policy as the region’s central banks are aggressively raising interest rates to tackle soaring inflation.

Japan is now the last major economy to have a central bank in the negative zone, after the Bank of Japan decided keep its interest rate held at -0.1% on Thursday.

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

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

European Central Bank moves above 0 as it increases in rate to combat the inflation spike on September 8.

The ECB may continue to raise rates, but future increases will not be as strong as the most recent 75 basis point hike on September 9, according to Edward Scicluna, a member of the ECB Governing Body.



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