In which direction is the Swiss Bank interest rate going, when will the hikes end?

Just a year ago, the key interest rate of the Swiss central bank was -0,25%. Currently, it is 1,5%, which was achieved in three interest rate increases. The first was 0,75 percentage points, the next two were 0,5 percentage points each, and the increase coming this week may amount to 0,25 percentage points.

Could this be the end of interest rate hikes in Switzerland?

Swiss National Bank likely to end the monetary policy tightening cycle in June, and then keep interest rates unchanged for more than a year, according to a survey of economists polled by the agency Bloomberg.

SNB officials are likely to end a cumulative cycle of 225 basis points of interest rate hikes with a final step of 25 basis points, bringing the interest rate to 1,75%, according to the median forecast in a poll conducted April 5-13. Then interest rates will be kept until September 2024, when a cut is expected.

The head of the SNB, Thomas Jordan, confirmed that further tightening of monetary policy is possible due to still higher, by Swiss standards, inflation. The average inflation level for the last 10 years in Switzerland was less than 0,5%. Meanwhile, economists expect Swiss consumer prices to rise by 2,5% this year and 1,5% in 2024, raising the forecast after the SNB also did so during its March interest rate decision.

Jordan said that while Swiss inflation was low compared to other countries, it was still off target. He also pointed out that wage increases were also higher than in previous years, while it was easier for companies to pass on these increases by raising prices. So Switzerland has to solve the potential problem of a spiral, the scale of which is nevertheless the lowest in Europe.

The SNB will publish its decision on Thursday

What may bring relief, despite the increase in interest rates, is a drop in the franc exchange rate by more than 11 percent. since October and to levels that were observed exactly one year ago. In mid-June CHF cost similarly PLN 4,55. However, the strength of the Polish currency seems to be still relatively high, which could help the CHF exchange rate fall even lower. Then attention may turn to the levels of PLN 4,45-4,40.