Swiss franc now ‘better than gold’ to beat inflation

THE Swiss franc is now a better hedge against spiralling inflation than gold, according to bank analysts.

Deutsche Bank said the Swiss franc is “better than gold” as a safe haven amid the cost of living crisis after the Swiss National Bank (SNB) delivered a surprise 50 basis-point hike in rates.

Switzerland’s central bank raised interest rates for the first time in 15 years, with a hike from minus 0.75pc to minus 0.25pc yesterday.

The central bank’s decision came shortly after the US Federal Reserve raised rates by 75 basis points and comes ahead of a likely increase by the European Central Bank (ECB).

Robert Winkler, currency analyst at Deutsche Bank, said: “This rate hike will come as a considerable surprise to the domestic market in particular, where expectations for any policy change today had been minimal going into this meeting.

“Combined with the large rate hike, the signal to the market is even clearer than it has been in recent months: the SNB now desires a stronger Swiss franc.

The rationale is clear: to prevent the transmission of excessive inflation from the eurozone.”

Switzerland has often waited for the ECB to move on rates before following suit. But the SNB said it needed to act quickly to stop inflation “spreading more broadly”.

Inflation hit 2.9pc in May, the highest level for around 14 years.

The bank said: “The tighter monetary policy is aimed at preventing inflation from spreading more broadly to goods and services in Switzerland.

“It cannot be ruled out that further increases in the SNB policy rate will be necessary in the foreseeable future.”

The Fed’s rate rise on Wednesday was its first such hike since 1994. Fed chairman Jerome Powell has suggested another three-quarter-point hike is possible at the Fed’s next meeting in late July if inflationary pressures persist.

Mr Powell has warned that inflation is now running higher than anticipated and that the public’s expectations for cost rises have also accelerated.

He said: “We thought strong action was warranted at this meeting, and we delivered that.”