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Swiss central bank announces interest rate hike to combat inflation

The Local Switzerland
The Local Switzerland - [email protected]
Swiss central bank announces interest rate hike to combat inflation
Swiss National Bank's headquarters in the Swiss capital Bern. (Photo by Fabrice COFFRINI / AFP)

The Swiss National Bank (SNB) announced on Thursday that it was raising the key interest rate by 0.25 percentage points to 1.75 percent.

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"The rate change applies from tomorrow, June 23rd 2023", the SNB said in a press release on Thursday.

In the statement, the SNB said the move is to counter "inflationary pressure, which has increased again over the medium term".

The bank added that "it cannot be ruled out that additional rises in the SNB policy rate will be necessary to ensure price stability over the medium term".

It came as inflation in Switzerland has declined significantly in recent months, dropping to 2.2 percent in May.

"This decrease was above all attributable to lower inflation on imported goods, in particular lower prices for oil products and natural gas," said the SNB.

However, this rate is still above the target set by the Swiss National Bank. 

The bank's statement outlined that "higher electricity prices and rents, and more persistent inflationary pressure from abroad," were having an effect on the inflation forecast.

Financial experts have repeatedly warned against the effect of increasing consumer prices. With this latest hike, the SNB's key interest rate is rising for the fifth time in a row. 

READ ALSO: How the cost of living is set to keep increasing in Switzerland 

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Rate hikes can mean several things for people living in Switzerland.

For instance, if you are planning to buy larger items that are usually purchased with credit, like homes, then you will likely have to shell out more cash. 

Meanwhile, mortgages can increase unless you have a fixed-rate deal in place. 

However, higher interest rates can have benefits for some people. For instance, if you have certain types of investments — such as bonds — 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 ALSO: How Switzerland's interest rate hikes might affect you

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