Swiss National Bank (SNB), the central bank of Switzerland.
Fabrice Cofriny AFP | Getty Images
The Swiss National Bank raised its benchmark interest rate on Thursday 0.5%, a change that ends an era of negative rates in Europe.
The 75 basis point increase followed a -0.25% increase on June 16, which was the first rate hike in 15 years. Earlier, the Swiss central bank had kept rates steady at -0.75% since 2015.
It comes after inflation in Switzerland hit 3.5% last month – the highest rate in three decades.
The bank said the policy rate hike is “against a renewed increase in inflationary pressures and a spread of inflation in goods and services which have so far been less affected.”
It added that further policy rate hikes “cannot be ruled out.”
The increase was in line with economists’ expectations, according to a Reuters poll.
The Swiss franc weakened against the dollar and euro after a dramatic rate hike. At 9:15 a.m. London time, the dollar was 1.24% higher against the Swiss currency, and the euro was 1.6% higher.
Earlier this week, the Swiss franc hit its strongest level against the euro since January 2015, as economists speculated about the possibility of a 75 basis point hike.
Switzerland was the last remaining country in Europe with negative policy rates as the region’s central banks raised rates aggressively to combat rising inflation.
Japan is now the last major economy with a central bank in negative territory, following the Bank of Japan’s decision Put his interest rate on hold Thursday at -0.1%.
Denmark, meanwhile, ended its nearly decade-long streak of negative rates on September 8 when the central bank raised its benchmark rate by 0.75 percentage points to 0.65%.
Most recently, Sweden’s central bank raised its interest rate to 1.75% on September 20. The 100 basis point increase came as the Riksbank warned, “Inflation is too high.”
The European Central Bank moved above zero after it raised rates on September 8 to combat rising inflation.
The ECB may continue to raise rates, but future hikes will not be as drastic as the most recent 75-basis-point hike on Sept. 9, according to ECB Governing Council member Edward Scicluna.