SNB surprises with 50 bps rate hike, bringing policy rate to -0.25%

  • Prior -0.75%
  • Sight deposits interest rate raised by 50 bps to -0.25%
  • The rate hike is to counter increased inflationary pressure
  • Tighter monetary policy aimed at preventing inflation from spreading more broadly
  • SNB still willing to be active in foreign exchange market as necessary
  • Cannot rule out further rate hikes to stabilise inflation
  • Full statement

Well, it looks like I’ll have to eat my words. The SNB does have the propensity to pull off a surprise and almost no one saw this coming, at least not a 50 bps move. It is their first rate hike since 2007 as they try to get ahead of the curve on  inflation . USD/CHF has dropped from 0.9975 to 0.9830 and this could just be the start if markets pile on the pressure. It’s not a good look as for risk as well when even the most dovish of central banks are starting to move.

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