ZURICH, Sept 22 (Reuters): Switzerland exited the era of negative interest rates on Thursday when its central bank joined others around the world in tightening monetary policy more aggressively to combat resurgent inflation.
The Swiss National Bank (SNB) raised its policy interest rate by 0.75 of a per centage point, ending the country's seven-and-a-half year experiment with negative rates which sparked opposition from its financial sector and fears of asset bubbles.
The increase to 0.5 per cent, from minus 0.25 per cent, followed a 50 basis point hike in June from minus 0.75 per cent, the SNB's first rate hike in 15 years.
Swiss government bond yields fell after Thursday's move, reversing course following an initial spike, while the franc dropped broadly, falling against the dollar, euro and pound as markets had priced in a 100 basis point rate hike by the SNB.
The central bank did not exclude more rate rises to come.
"It cannot be ruled out that further increases in the SNB policy rate will be necessary to ensure price stability over the medium term," SNB Chairman Thomas Jordan told a news conference.
Jordan declined to give details of the timing or size of any future hikes.
The SNB would also still use forex interventions, purchasing foreign currencies to rein in an "excessive appreciation" of the Swiss franc or selling them to prop up the currency, Jordan said.
He said there was no set exchange rate which would push the SNB into action.
The SNB's decision to increase rates followed rising prices in Switzerland and hawkish moves by other central banks that are trying to keep a lid on resurgent inflation caused by spiralling energy costs, tight labour markets and supply chain bottlenecks.
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