Swiss National Bank holds rates steady, will not rule out more hikes

Chairman Thomas Jordan of the Swiss National Bank (SNB) attends a news conference in Zurich, Switzerland, March 23, 2023. REUTERS/Denis Balibouse/File photo

ZURICH  – The Swiss National Bank held its policy interest rate unchanged at 1.75 percent on Thursday as the central bank paused its campaign against inflation which has recently ebbed lower in Switzerland, but said a further tightening cannot be ruled out.

The SNB kept its policy rate and the rate it charges on sight deposits at the same level it set in June, marking the first time the central bank has not hiked rates since March 2022.

The pause ran counter to forecasts in a Reuters poll which had predicted a 25 basis point increase, though money market pricing suggested it was seen as a close call. The freeze comes after Swiss inflation came in at 1.6 percent in August, the same level as in July – within the SNB’s goal for price rises of 0-2 percent.

Five consecutive interest rate hikes totaling 250 basis points have helped inflation fall from last year’s peak of 3.5 percent and remain within the central bank’s 0 percent-2 percent target for the past three months.

The SNB diverged from the European Central Bank, which raised its key interest rate to a record high of 4 percent last week, although the U.S. Federal Reserve kept its rates unchanged on Wednesday.

Sweden’s Riksbank is also expected to raise its rates on Thursday, while the Bank of England and Norway’s central bank also meet on Thursday.

“The significant tightening of monetary policy over recent quarters is countering remaining inflationary pressure,” the Swiss central bank said in a statement.

“From today’s perspective, it cannot be ruled out that a further tightening of monetary policy may become necessary to ensure price stability over the medium term,” it said, adding that it will closely monitory price developments in the coming months.

Tackling resurgent inflation has been the overriding goal of the SNB in recent months, with the central bank allowing the Swiss franc to rise in value as a way to limit imported price rises.

The SNB maintained its 2.2 percent inflation forecast for 2023 and 2024, but trimmed its outlook for 2025 to 1.9 percent from the 2.1 percent it predicted in June.

The central bank also maintained its forecast for economic growth of around 1 percent this year.

The Swiss government on Wednesday said it expected the country’s economy to grow by 1.3 percent in 2023 and 1.2 percent in 2024. It forecast Swiss inflation to be 2.2 percent this year and 1.9 percent in 2024