The Swiss National Bank raised interest rates by 0.75%, the first positive rate in 8 years

End of Europe's Sub-Zero Rate Cycle with Switzerland

Ahmedabad: The world's most important central bank, the Swiss National Bank has increased the interest rate by 75 basis points on Thursday. With this, a long cycle of negative interest rates or sub-zero i.e. zero percent interest rates has come to an end in the European Union.

The Swiss National Bank raised interest rates by 75 basis points to bring borrowing costs above zero for the first time in nearly eight years to curb inflation. The board, led by Thomas Jordan, hiked key interest rates by 75 basis points to 0.5% in Switzerland, the most aggressive monetary policy in two decades.

The Swiss franc fell 1.6% against the euro to 96.23 centimes, avoiding a feared 100 basis point rise in the downside. Suspects that further rate hikes are needed by the Swiss National Bank benchmark to curb inflation in the medium term cannot be ruled out. Jordan added that he is ready to intervene in the currency market along with interest rates if necessary.

Europe's decade-long subzero cycle has now ended, with interest rates turning positive in Switzerland as well. The only central bank left with a subzero policy globally is now the Bank of Japan, which held its benchmark at -0.1% on Thursday.

In new economic forecasts released on Thursday, the central bank cut its growth forecast for this year to 2% from 2.5% estimated in June. Apart from this, inflation is estimated to decrease to 2.4% next year and 1.7% in 2024, but inflation is expected to be around 3% in 2022. The next meeting of the Swiss National Bank will be held on December 15. Unlike the ECB, Switzerland's central bank meets only quarterly.