Swiss National Bank (SNB), the central bank of Switzerland.
Fabric Cofferini | AFP | Getty Images
The Swiss National Bank raised its benchmark interest rate to 0.5%, a shift that ended the era of negative interest rates in Europe.
The 75 basis point rate hike was the first in 15 years after the June 16 rate hike to -0.25%. Before that, the SNB had kept rates at -0.75% since 2015.
Inflation in Switzerland hit 3.5% last month – the highest level in 30 years.
The bank said the policy rate hike was “in response to a renewed rise in inflationary pressures and the spread of inflation to goods and services that have so far been less affected”.
It added that “a further increase in the policy rate cannot be ruled out”.
The rate hike was in line with economists’ expectations, according to a Reuters poll.
The Swiss franc weakened sharply against the dollar and euro after the rate hike. At 9:15 am London time, the dollar was up 1.24% against the Swiss currency and the euro was up 1.6%.
Earlier this week, the Swiss franc touched its highest level against the euro since January 2015, as economists began speculating on the prospect of a 75 basis point appreciation.
Switzerland is the last country in Europe to have a negative policy rate, as the region’s central banks have been aggressively raising rates to combat soaring inflation.
Japan is now the last major economy with a central bank in negative territory keep interest rates unchanged It was -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 rate by 0.75 percentage points to 0.65 percent.
Most recently, the Riksbank raised interest rates to 1.75% on September 20. Sweden’s central bank warned that “inflation is too high” and raised interest rates by 100 basis points.
When the European Central Bank raised rates on Sept. 8 to combat soaring inflation, its rates had risen above zero.
Edward Scicluna, a member of the European Central Bank’s Governing Council, said the ECB may continue to raise interest rates, but future rate hikes will not be as dramatic as the last 75 basis point hike on September 9.