The CHF rallies after surprise 50-point interest rate hike

The Swiss National Bank, (SNB) has surprised the market and raised interest rates by 0.5% to combat inflation. The SNB was one of the last central banks holding firm in its dovish stance, however with growing inflation felt now was the time to intervene and raised rates from -0.75% interest to -0.25%. It was the first interest rate rise since 2007 and followed rate increases from the US Federal Reserve earlier this week.

Pressure had been building on the Swiss after recent data showed a near 14-year high rate of inflation. Similarly, the European Central Bank signalled it will kick off rate hiked in July. SNB Governor, Thomas Jordan flagged the potential for more interest rate hikes outlining that the currency was not as strong as it once was. This leaves The Bank of Japan as the only developed central bank who not adjusted interest rates.

In response to the announcement the USD tumbled 3.1% against the CHF as it saw it largest drop in almost 7 years. The EUR also dropped 1.8% against the CHF which saw it largest since January 2015. The yields on Swiss 10 year bonds rose 18 basis points and Swiss stocks dropped by 3%.

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