Swiss Central Bank hikes interest for first time in 15 years

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On Thursday, the Swiss National Bank tightened the monetary policy, raising the benchmark interest rate by 50 basis points from -0.75% to -0.25% for the first time in 15 years.

This is Switzerland's first interest rate increase since September 2007, which surprised many. According to the DailyFX portal's surveys, experts do not expect the rate to alter.

The Swiss franc was 1.5% stronger against the euro and 1% stronger against the dollar as of 08:41 GMT. Following the announcement of the Central Bank's decision, the exchange rate increased by 2% against the euro and 1.6% against the dollar.

The Central Bank stated that the interest rate was hiked to handle "increased inflationary pressure" in the country, despite the fact that it is relatively low in comparison to other European countries, standing at 2.9%.

Swiss National Bank chair Thomas Jordan told CNBC that "we came to the conclusion that it's the right time now to tighten monetary policy in order to make sure that over the medium term inflation then returns to the zone of price stability." 

Jordan also did not exclude further rises "to stabilize inflation over the medium term below 2%."

According to the Central Bank, inflation in Switzerland reached 2.9% in May and is unlikely to fall further. The prediction for this year has been raised from 2.1% to 2.8%, with 0.9% to 1.9% projected in 2023 and 0.9% to 1.6% expected in 2024.