The Swiss National Bank (SNB) increased its policy rate and the rate it charges on sight deposits to 1.75% from the 1.5% level set in March, its fifth increase in a row since the bank started its hiking cycle last year, the SWI said. Reported, Inflation declined significantly to 2.2% in May but remains above the target set by the SNB, which warned that price pressures persist and would make themselves felt in coming months without action.

It said in a statement External link that the decision to raise its key rate by a quarter-percentage point to 1.75% was “countering inflationary pressure which has increased again over the medium term”. Inflation destroys wage hikes in Switzerland! Central banks around the world have sharply raised interest rates to combat an outbreak of inflation triggered by the rebound from the pandemic, higher energy prices and Russia’s invasion of Ukraine.

“It cannot be ruled out that additional rises in the SNB policy rate will be necessary to ensure price stability over the medium term,” the SNB said. The central bank said it also remained ready to intervene in currency markets to maintain price stability, which it defines as an inflation rate of 0-2%.

An update on Swiss economic fortunes says, in recent months the SNB has been selling foreign currencies to boost the value of the Swiss franc, whose strength has reduced the effect of more expensive imports.

In the past 12 months the SNB has switched focus from tackling the high value of the Swiss franc to combating price rises which it has said run the risk of becoming entrenched and harder to shift.