The Swiss National Bank (SNB) hiked up interest rates today by 75 basis points to move the official lending rate into positive territory for the first time in more than 10 years. Recently, financial markets fully priced in a 50bp increase, with analysts leaning toward a three-quarters-of-a-percent-rise.
The SNB claim to be unable to guarantee further rate increases because they desire to ensure price stability. However, the central bank revealed its willingness to participate in the foreign exchange market.
The SNB anticipates a 2% GDP growth this year, a 1/2% point lesser than the last meeting. The central bank also noted that inflation, 3.5% in August, is likely to remain high. The Swiss Franc weaken against the Euro after a reaction in the FX market. This caused traders to lean on the central bank’s caution that it is willing to be active in the FX market.