On Thursday, it was announced that the central bank of Switzerland increased its key interest rate to the level of 0.5%. This has ended a notable historical period of negative interest rates in Europe.
The occurred increase by 75 basis points is not the first one in the current year, since there was a June rate hike to the level of -0.25%, which was the first one over 15 years. Up until that point, the central bank had been keeping rates at the level of -0.75% since 2015.
The latest hike, though, has moved the rates into the positive zone. It happened against the background of the 30-year record inflation levels, which reached 3.5% last month.
According to a statement made by the Swiss central bank, the rate increasing is a part of combating another wave of growing inflation pressure and its effect on spheres and products it hasn’t reached before. The bank also acknowledges possible subsequent hikes.
So, an era of negative rates is over in European countries, as Switzerland was the last economy of the region that kept the rates negative. Central banks of other European countries previously started aggressive hikes in their attempts to control or slow down worsening inflation.
At the moment, the world’s only major economy to keep negative rates is Japan. On Thursday, its central bank made a decision to keep interest rates at the level of -0.1%.
In addition, an almost 10-year period of negative rates ended in Denmark on September 8, when its central bank increased the key interest rate by 0.75 percentage points, hiking it to the level of 0.65%.