How Switzerland's interest rate hike might affect you
The Swiss National Bank (SNB) raised its key rate on Thursday, not ruling out further increases “to ensure price stability in the medium term". What effect could this have on consumers?
“The SNB is tightening its monetary policy further and is raising policy rate by 0.5 percentage points to 1.5 percent,” the central bank said in a press release on Thursday.
In doing so, the SNB “is countering the renewed increase in inflationary pressure,” the bank added.
The rate change will go into effect from Friday, March 24th, 2023.
With this latest hike, the SNB's key interest rate goes up for the fourth time in a row, suggesting that the fight against inflation is currently outweighing financial market concerns with the emergency takeover of Credit Suisse by UBS.
"Inflation has risen again since the beginning of the year, and stood at 3.4 percent in February. It is therefore still clearly above the range the SNB equates with price stability,” the bank said.
Monetary policy assessment: The press release and introductory remarks delivered by the Governing Board members at the news conference are available on our website (in English, German, French and Italian): https://t.co/F9E6e5f8BT pic.twitter.com/u1ZUzuD02X
— Swiss National Bank (@SNB_BNS) March 23, 2023
It added that Switzerland is not the only country where key rates are increased.
“The global economy hardly grew in the fourth quarter, while in many countries inflation remained clearly above central banks’ targets. Against this background, numerous central banks have tightened their monetary policy further,” the SNB pointed out.
Also, the forecast calls for “further inflationary pressure from abroad.”
“Growth prospects for the global economy over the coming quarters remain weak. At the same time, inflation is expected to remain elevated globally for the time being," the bank added.
The SNB has also raised its inflation projections for Switzerland for the current year, as well as for 2024, to 2.6 percent and 2.0 percent, respectively.
In September 2022, its outlook called for 2.4 percent for 2023 and 1.7 percent for 2024.
“The inflation is likely to remain at the very top of the range considered acceptable for monetary stability in 2025 as well,” the bank said.
However, by international comparison, the SNB's key interest rate remains relatively low.
The European Central Bank recently raised its rates to between 3 and 3.75 percent. The Fed, the US central bank, upped rates to between 4.75 and 5 percent.
What does this hike in interest rates mean for you?
It depends on what, if anything at all, you are looking to buy.
If you are planning to get big-ticket items that are usually purchased with credit — like homes — then you may have to dig deeper into your pockets.
If you already have a fixed-rate mortgage, then you are safe from rate increases for its term.
If not, rates could go up, though it is not clear by how much.
But it is not all bad news; higher interest rates will yield some benefits as well.
For instance, if you have certain types of investments — such as bonds and other fixed-income financial products — you may see more money coming in.
And if you have a bank account, you can expect to see a higher yield on your assets, though the actual increase depends on several factors, such as what bank you use and what kind of accounts you have there.
READ MORE: Which Swiss banks offer the highest interest rates on savings?
Comments
See Also
“The SNB is tightening its monetary policy further and is raising policy rate by 0.5 percentage points to 1.5 percent,” the central bank said in a press release on Thursday.
In doing so, the SNB “is countering the renewed increase in inflationary pressure,” the bank added.
The rate change will go into effect from Friday, March 24th, 2023.
With this latest hike, the SNB's key interest rate goes up for the fourth time in a row, suggesting that the fight against inflation is currently outweighing financial market concerns with the emergency takeover of Credit Suisse by UBS.
"Inflation has risen again since the beginning of the year, and stood at 3.4 percent in February. It is therefore still clearly above the range the SNB equates with price stability,” the bank said.
Monetary policy assessment: The press release and introductory remarks delivered by the Governing Board members at the news conference are available on our website (in English, German, French and Italian): https://t.co/F9E6e5f8BT pic.twitter.com/u1ZUzuD02X
— Swiss National Bank (@SNB_BNS) March 23, 2023
It added that Switzerland is not the only country where key rates are increased.
“The global economy hardly grew in the fourth quarter, while in many countries inflation remained clearly above central banks’ targets. Against this background, numerous central banks have tightened their monetary policy further,” the SNB pointed out.
Also, the forecast calls for “further inflationary pressure from abroad.”
“Growth prospects for the global economy over the coming quarters remain weak. At the same time, inflation is expected to remain elevated globally for the time being," the bank added.
The SNB has also raised its inflation projections for Switzerland for the current year, as well as for 2024, to 2.6 percent and 2.0 percent, respectively.
In September 2022, its outlook called for 2.4 percent for 2023 and 1.7 percent for 2024.
“The inflation is likely to remain at the very top of the range considered acceptable for monetary stability in 2025 as well,” the bank said.
However, by international comparison, the SNB's key interest rate remains relatively low.
The European Central Bank recently raised its rates to between 3 and 3.75 percent. The Fed, the US central bank, upped rates to between 4.75 and 5 percent.
What does this hike in interest rates mean for you?
It depends on what, if anything at all, you are looking to buy.
If you are planning to get big-ticket items that are usually purchased with credit — like homes — then you may have to dig deeper into your pockets.
If you already have a fixed-rate mortgage, then you are safe from rate increases for its term.
If not, rates could go up, though it is not clear by how much.
But it is not all bad news; higher interest rates will yield some benefits as well.
For instance, if you have certain types of investments — such as bonds and other fixed-income financial products — you may see more money coming in.
And if you have a bank account, you can expect to see a higher yield on your assets, though the actual increase depends on several factors, such as what bank you use and what kind of accounts you have there.
READ MORE: Which Swiss banks offer the highest interest rates on savings?
Join the conversation in our comments section below. Share your own views and experience and if you have a question or suggestion for our journalists then email us at [email protected].
Please keep comments civil, constructive and on topic – and make sure to read our terms of use before getting involved.
Please log in here to leave a comment.