Inflation fears prompt Switzerland’s central bank to raise interest rates by 0.5%

The Swiss central bank raised a key interest rate by half a percentage point on Thursday, the first hike in over 15 years. It appeared to be an attempt to stave off inflationary pressures as global food and gasoline costs rose.

The rate hike will take effect on Friday, according to the Swiss National Bank. Following the revelation, the Swiss franc, which is normally seen as a stable currency, rose versus the euro and the US dollar in currency markets.

The rate on sight deposits will be raised by a half-point to a minus 0.25 percent, according to the bank. Swiss interest rates have been zero for months, showing that monetary officials in the wealthy Alpine country are unconcerned about inflation.

The Swiss central bank recently raised interest rates in January 2015, while the most recent hike was in September 2007, according to the Swiss central bank.

The bank stated that it “cannot rule out” the possibility of future rate hikes. Switzerland’s annualised inflation rate was 2.9 percent in May, according to the report.

According to the bank, global economic growth has slowed “significantly” in recent months, owing to rising inflation, the repercussions from Russia’s war in Ukraine, and coronavirus lockdowns in China. According to the report, supply shortages have pushed up the pricing of various commodities.

The bank said it “assumes that energy prices will remain high for the time being, but that there will not be an acute energy shortage in the major economic areas.”

“The positive development of the economy should thus continue overall,” the national bank said in a statement.