The Swiss Federal Reserve raised the main interest rate on Thursday as other central banks in Europe began following the US Federal Reserve’s playbook in an effort to rein in inflation.
The Swiss central bank raised the policy rate by half a point to 1%, as the Fed chose on Wednesday and the Bank of England did a day later. The same increase was expected from the European Central Bank on Thursday, while Norway’s central bank increased by a smaller quarter point.
The Swiss bank said consumer prices still rose to 3% in November, despite falling inflation in recent months – above its target, but much lower than seen in the 19-country eurozone, where inflation is painfully at 10%. In the UK it is even higher at 10.7%, while in the USA it is 7.1%.
In Switzerland, the half-point gain was a slowdown of the bank’s three-quarter-point gain in September, the largest ever to end negative interest rates in several years.
The bank said it could not ignore taking further steps to make borrowing more expensive, citing slowing global economic growth and a world “exposed to significant risks” such as the energy crisis in Europe, the COVID-19 pandemic and persistent high inflation. .
In its base scenario for the global economy, the SNB expects this challenging situation to continue for now. Global economic growth is likely to be weak in the coming quarters and inflation will remain high in the coming quarters, the bank said in a statement. moment.”
The bank cut its inflation forecast for the end of this year and the first three months of 2023 from its September forecast, expecting the rate to remain at 3% before falling. However, the inflation forecast is “higher in the medium term” despite rate increases. Its new estimates put the average annual inflation at 2.9% this year, 2.4% next year and 1.8% in 2024.
It predicts an economic growth of about 2 percent this year, but says that “weak demand from abroad and high energy prices will significantly curb economic activity next year,” the bank also expects a growth of about 0.5 percent next year.
“Forecasts for Switzerland, as well as for the global economy, are subject to a high level of uncertainty,” the bank said.