Swiss central bank slows rate hiking with half-point move

Bloomberg

The Swiss National Bank (SNB) raised its interest rate by
50 basis points, a third salvo against inflation that narrows the gap with the borrowing costs of global peers.
Officials raised the benchmark to 1%, as predicted by a majority of economists surveyed by Bloomberg. Further increases can’t be ruled out, the central bank said.
“There is a danger that inflation could remain elevated in Switzerland in the medium term owing to second-round effects,” President Thomas Jordan told journalists in Bern.
“The renewed tightening of our monetary policy is therefore necessary.”
The move was less than the 75 basis-point hike the SNB implemented in September. Still,
it lifts benchmark borrowing costs towards the higher levels in the surrounding euro zone and in the US, helping shore up the franc to contain imported price pressures.
The country’s outlook remains more benign than elsewhere, with inflation at the lowest in the OECD and no imminent threat of a recession.
A lack of specific communication by SNB officials on the likely size of the hike left economists split on the outcome. While most predicted a half-point move, two anticipated a quarter point and five reckoned on 75 basis points transpiring.
“It was pretty clear that 50 basis points is the right decision,” Jordan said in a Bloomberg Television interview. “If you look at our inflation forecasts over the medium term, inflation is still slightly above our 2% threshold.”
The SNB’s increase follows the Federal Reserve’s hike, accompanied by Chair Jerome Powell’s comment that officials have more work to do to vanquish inflation. It precedes a likely half-point hike by the European Central Bank.
While those counterparts take decisions twice as often, Swiss officials with their quarterly meetings could still claim more progress in tightening monetary policy than in the euro zone.
That’s because rates in Switzerland are higher in real terms than in the surrounding region.