monetary policy
Another interest rate hammer: The National Bank increases the key interest rate to 1.75 percent
The Swiss National Bank has lowered the key interest rate
increased 0.25 percentage points to 1.75 percent. It is thus continuing to tighten interest rates – for the fifth time since last summer.
National Bank boss Thomas Jordan announced another interest rate hike on Thursday.
Bild: Keystone
The turning point came last summer: At that time, the Swiss National Bank (SNB) raised the key interest rate for the first time in 15 years – but left it in negative territory at -0.25 percent. That’s long history: since then there have been three further rate hikes, and the next one followed on Thursday.
The SNB raised the key interest rate by 0.25 percentage points to 1.75 percent. The SNB announced this on the occasion of the quarterly monetary policy assessment. The interest rate change will apply from Friday. The National Bank is thus further tightening monetary policy.
The fight against inflation is not over yet
With the increase, the SNB wants to counteract the inflationary pressure, which has risen again in the medium term, as it announced. Inflation in Switzerland fell to 2.2 percent in May. It is at its lowest level since February 2022.
However, a further increase in the key interest rate was expected, since the fight against inflation is not over – inflation is still too high for the SNB. Price stability is given for the National Bank as long as inflation is below 2 percent. It therefore does not rule out further interest rate hikes, as it announced.
In its new forecast, the SNB expects inflation in the current year to average 2.2 percent – slightly lower than forecast in March. According to the SNB, the lower oil and gas prices and the stronger franc will have a dampening effect in the short term. In 2024 it should also be 2.2 percent and in 2025 around 2.1 percent – despite the increased key interest rate. Without the current rate hike, the inflation forecast would be even higher in the medium term, emphasizes the SNB.
Low interest rates in global comparison
The National Bank followed the European Central Bank (ECB) – but is still low in comparison. A week ago, the ECB raised key interest rates in the euro area to a further 0.25 percent – it was the eighth interest rate hike in a row. The key interest rate will thus rise to 4 percent. The last time the global financial crisis began in early October 2008 was that it was higher, at 4.25 percent.
Unlike the ECB, the US Federal Reserve (Fed) paused after ten rate hikes in a row. It left its key interest rate in the range of 5 to 5.25 percent last week. However, the central bank of the world‘s largest economy made it clear that this was by no means the end of the stricter monetary policy. The Fed signaled at least two more rate hikes this year.
One man’s meat is another man’s suffering
Central banks try to slow down inflation by raising interest rates. At the same time, the higher key interest rates can themselves cause economic problems – for example, loans for companies become more expensive. This could lead them to invest less.
Savers, on the other hand, benefit from higher key interest rates: the banks often adjust their interest rates on savings and pension accounts upwards as well.
(With material from the dpa)