Swiss central bank enacts biggest-ever hike to key rate

Sep 22, 2022, 1:03 AM | Updated: 7:34 am

GENEVA (AP) — Switzerland’s central bank carried out the biggest hike ever to its key interest rate Thursday, following the U.S. Federal Reserve and other central banks around the world in aggressive moves to clamp down on inflation.

The Swiss National Bank could not rule out that further increases beyond the rise of three-quarters of a percentage point “will be necessary to ensure price stability over the medium term,” said Thomas Jordan, chairman of SNB governing board.

It aims to cool off inflation that came in at 3.5% in August, which is much lower than the record 9.1% in the 19 neighboring European Union countries that use the euro.

The Swiss rate increased from minus 0.25% to 0.5%, ending several years of negative interest rates — a testament to the stable growth, low-inflation environment, coupled with Switzerland’s appeal as a safe haven for assets.

In essence, that negative interest rate environment meant that people who parked assets in Switzerland paid for the privilege, a counterintuitive idea for many investors who might expect a return on their savings.

Some economists have said that Switzerland appeared less vulnerable to inflation pressures because the cost of living in the wealthy Alpine country is relatively high compared to its main neighbors: European Union countries.

A recent surge in the value of the Swiss franc compared to the euro, for example, has caused many Swiss consumers to cross the border into neighboring countries like France or Germany to buy gasoline and other consumer goods that suddenly are relatively less expensive there.

Jordan said the bank would “intervene in foreign exchange markets to steer monetary conditions” if “exchange rate movements are excessive so that you have a massive appreciation” in the franc.

The Swiss currency dropped more than 1% against the euro after the bank’s announcement, with economists saying some investors may have expected an even bigger hike.

The move comes a day after the Fed raised its key rate by three-quarters of a point for the third consecutive time and signaled that more increases were ahead.

The European Central Bank also hiked by that much earlier this month, and the Bank of England is under pressure to move aggressively at its meeting Thursday.

Switzerland is not an EU member, but most of its economic activity is done with the giant 27-nation bloc.

Swiss-EU ties have been strained in recent years over issues including more than 100 bilateral agreements that the two sides have struggled to renew and demands of some populist politicians in Switzerland to limit the number of EU citizens who can live and work in the country. That concept greatly unsettles Brussels, because one of the EU’s central principles is free circulation of people within its member states’ territories and with other partners in the so-called Schengen zone.

Copyright © The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.


Arizona and New York attorneys feud over extraditing suspect...

Associated Press

Why Alvin Bragg and Rachel Mitchell are fighting over extraditing suspect in New York hotel killing

Maricopa County Attorney Rachel Mitchell says she isn't into extraditing a suspect due to her lack of faith in Manhattan’s top prosecutor.

3 days ago

A Gila monster is displayed at the Woodland Park Zoo in Seattle, Dec. 14, 2018. A 34-year-old Color...

Associated Press

Colorado man dies after being bitten by pet Gila monster

A Colorado man has died after being bitten by his pet Gila monster in what would be a rare death by one of the desert lizards if the creature's venom turns out to have been the cause.

4 days ago

Police clear the area following a shooting at the Kansas City Chiefs NFL football Super Bowl celebr...

Associated Press

1 dead, many wounded after shooting at Kansas City Chiefs’ Super Bowl victory parade

One person died after 22 people were hit by gunfire in a shooting at the end of the Kansas Chiefs' Super Bowl victory celebration Wednesday.

11 days ago

This image from House Television shows House Speaker Mike Johnson of La., banging the gavel after h...

Associated Press

GOP-led House impeaches Homeland Security Secretary Mayorkas — by one vote — over border management

Having failed to impeach Homeland Security Secretary Alejandro Mayorkas the first time, House Republicans are determined to try again Tuesday.

12 days ago

Defense Secretary Lloyd Austin, right, and Kenya's Defense Minister Aden Duale, left, listen during...

Associated Press

Defense Secretary Lloyd Austin hospitalized with bladder issue

Defense Secretary Lloyd Austin has been hospitalized following symptoms pointing to an “emergent bladder issue."

14 days ago

Joel Osteen, the pastor of Lakewood Church, stands with his wife, Victoria Osteen, as he conducts a...

Associated Press

Woman firing rifle killed by 2 off-duty officers at Houston’s Lakewood Church run by Joel Osteen

A woman entered the Texas megachurch of Joel Osteen and started shooting with a rifle Sunday and was killed by two off-duty officers.

14 days ago

Sponsored Articles


Midwestern University

Midwestern University Clinics: transforming health care in the valley

Midwestern University, long a fixture of comprehensive health care education in the West Valley, is also a recognized leader in community health care.


Fiesta Bowl Foundation

The 51st annual Vrbo Fiesta Bowl Parade is excitingly upon us

The 51st annual Vrbo Fiesta Bowl Parade presented by Lerner & Rowe is upon us! The attraction honors Arizona and the history of the game.


Day & Night Air Conditioning, Heating and Plumbing

Valley residents should be mindful of plumbing ahead of holidays

With Halloween in the rear-view and more holidays coming up, Day & Night recommends that Valley residents prepare accordingly.

Swiss central bank enacts biggest-ever hike to key rate