By Hans Bentzien and Ed Frankl
The Swiss National Bank raised interest rates as expected on Thursday, and said it wouldn’t rule out further hikes in an effort to combat persistent inflationary pressures.
The central bank raised its key policy rate by 0.25 percentage points to 1.75%, from 1.5% previously, matching expectations from economists polled by The Wall Street Journal. It was the institution’s first rate hike since March.
The news comes on a day of multiple central-bank announcements, with Norway’s Norges Bank having surprised consensus by raising its policy rate more than expected, to 3.75% from 3.25%. Rate decisions from Turkey’s central bank and the Bank of England, which is having to reassess its battle with inflation after data for May came in hotter than expected, are also due on Thursday.
The SNB said the rise is in order to counteract inflationary pressures, which have risen again in the medium term.
Inflation in the landlocked nation was 2.2% in May, high by historical standards but less than the 2.6% recorded in April and its 29-year high of 3.5% in August 2022, as inflation on imported oil and gas cooled.
But even with easing consumer prices, the bank said: “It cannot be ruled out that additional rises in the SNB policy rate will be necessary to ensure price stability over the medium term.”
The bank, however, cut its estimates for average inflation for 2023 as a whole, to 2.2% from 2.6%, based on lower energy prices than previously expected and the strong Swiss franc.
But it ticked up its forecasts for 2024 and 2025 to 2.2% and 2.1% respectively, from 2.0% for both years, on expectations of second-round inflationary effects, higher electricity prices and rents, alongside more persistent inflationary pressures from abroad, the SNB said.
The bank added that it expects modest economic growth for the rest of the year, sticking to its gross-domestic-product forecast of around 1.0%, hit by the greater effect of subdued demand from abroad, the loss of purchasing power due to inflation, and more restrictive financial conditions.
Write Hans Bentzien at [email protected] and Ed Frankl at [email protected]
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