|  NEWS

Switzerland’s central bank hiked its policy interest rate on Thursday for the first time in 15 years.

The Swiss National Bank (SNB) increased the rate to -0.25% from -0.75% and indicated it was prepared to make further hikes. Almost all economists surveyed by Reuters predicted the central bank would hold rates steady.

This was the first rise by the SNB since September 2007 and follows on from the U.S. Federal Reserve’s 0.75 percentage point rise on Wednesday. The Bank of England also raised rates by 0.25%.

Central bank chairman Thomas Jordan said rising inflation in Switzerland signals the SNB may have to take further action.

Even after this week’s rate hike, Switzerland’s central bank forecasts inflation to reach 2.1% in Q1 2025, outside its target range for a rate of 0%-2%, CNN reports. A rate of 2.8% is expected in 2022.

"Without today's SNB policy rate increase, the inflation forecast would be significantly higher," the central bank chairman said during a news conference.

"The new inflation forecast shows that further increases in the policy rate may be necessary in the foreseeable future.

"We are not in the business of very precise forward guidance, but ... at the end of our forecast horizon inflation will again go over 2% so we have to see what measures are necessary," Jordan added.

Further rate hikes are forecast in the coming quarters by analysts. "Going forward, the monetary policy message is on the hawkish side," according to Gero Jung, Mirabaud Asset Management analyst. "For SNB economists, the Swiss Franc is not over-valued anymore; second, inflation is expected to be above the limit that is associated with price stability in Switzerland."

Whereas David Oxley at Capital Economics said it was likely the central bank will again hike rates to zero or into positive territory, before the next meeting in September.

However, this latest increase has faced criticism from the country’s labour union federation, who said the SNB was allowing the Franc to rise further, placing jobs and wages at risk.

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