Swiss Central Bank Hikes Interest Rate by Half a Point

In an unexpected move, Switzerland's central bank announced a half a percentage-point increase to the country’s interest rate on Thursday, the first such move in almost 15 years. 

The central bank said the intervention was designed to stave off inflationary pressures as food and fuel prices showed continued upward movement.

The Swiss franc, a currency known for its extreme stability, rose atypically sharply against the euro and the US dollar after the announcement.

Switzerland’s interest rate had been sitting at negative 0.75% for months, but inflation has caught up with even this affluent country, which has not had to contend with the effects of inflation as early as other countries.

The central bank has said it cannot rule out other rate hikes in the future. Annualized inflation came in at 2.9% for Switzerland in May, a worrying high.

What does this mean for me? 

Switzerland is navigating the challenges that so many other developed nations are trying to work through. Global economic growth has slowed in recent months, weighted down by inflation, and exacerbated by Russia's war in Ukraine that has affected global supply chains of key goods. 

Some analysts are likening high inflation to a contagion that is spreading around the world. If it can reach an economically secluded and prosperous country like Switzerland, it will likely continue to have dire consequences for the remainder of the world.