The European Central Bank (ECB) is declaring war on skyrocketing inflation in the euro zone. Although the first increase in key interest rates since 2011 was considered a foregone conclusion, President Christine Lagarde (66) and the Governing Council of the ECB surprised with the sharp increase of 0.5 percentage points.
The turnaround in interest rates decided in Frankfurt (D) is also of great importance for Switzerland. The economies of Switzerland and the eurozone are closely intertwined. Germany is still considered Switzerland’s most important trading partner. Blick shows what the European rate hike means for Swiss savers, homeowners and holidaymakers.
Are beach holidays in the EU becoming more expensive now?
At least not immediately. The interest rate hike is likely to weaken the franc against the euro. Because: With higher interest rates, the volume of foreign investments increases, and the demand for the European currency increases accordingly. As a result, the euro appreciates in comparison to the Swiss franc.
However, it could be months before the change in monetary policy affects the inflation rate and the exchange rate. So it cannot be assumed that Thursday’s ECB decision will make this year’s summer holidays in Italy or Spain massively more expensive for Swiss people. But as soon as the euro picks up again against the Swiss franc, Swiss travelers are also likely to feel the effects of EU inflation.
What do higher interest rates in the Eurozone mean for my savings accounts?
Here, too, bank customers from Switzerland are not directly affected. Nevertheless, the decision by the European monetary authorities could make hoarding money in savings accounts more attractive again in the medium term.
Because the sharp increase in interest rates in the euro zone will probably also lead to a strategy adjustment at the Swiss National Bank (SNB). “Your leeway is now increasing again,” says economics professor Reto Föllmi (46) from the University of St. Gallen.
Because the stronger euro is likely to reduce the risk of a blatant overvaluation of the Swiss franc, SNB President Thomas Jordan (59) and Co. can carry out the interest rate hike in September, which experts have promised, with less worries. And with higher key interest rates, banks are likely to offer their customers the prospect of improved savings rates again soon – as happened a month ago after the SNB’s interest rate turnaround.
Real estate expert on high interest rates: «If you want to take out a mortgage, you have to pay more»(01:21)
Are mortgage interest rates going through the roof now?
Real estate expert Donato Scognamiglio (52) believes that the SNB will also follow suit after the interest rate hike in the euro zone. Shortly after the turnaround in interest rates in Switzerland, he said in a glance: “It is very likely that interest rates will continue to rise.”
Because the increase of 0.5 percentage points in the euro zone is unexpectedly high, mortgage interest rates are also likely to experience a further increase. The fact that banks in Switzerland and Europe have foreseen and already anticipated the turnaround in interest rates has a relieving effect: Mortgage interest rates in Switzerland rose at the beginning of the year – even before the interest rate hikes by the central banks. A strong increase is therefore not to be expected following the ECB decision. This is of particular benefit to households without reserves.
How is the Swiss export industry affected?
In the past, the Swiss export industry constantly complained about the strong Swiss franc – for example when the minimum euro exchange rate was lifted in January 2015. Parity between the Swiss franc and the euro is now a fact again. However, there are hardly any complaints at the moment – with the exception of Stadler Rail patron Peter Spuhler (63), who asked himself after the SNB interest rate hike what the experts at the SNB “smoked”.
Nevertheless, Swiss exporters should take the ECB’s decision with goodwill. In this respect, the SNB is no longer alone in a European comparison. A week ago, Swissmem Vice President Jean-Philippe Kohl (56) said to Blick: “If the European Central Bank finally followed suit with the interest rate hike, it would also have a dampening effect on the franc.”
This is exactly what should happen in the next few weeks and provide additional relief for the Association of the Swiss Machinery, Electrical and Metal Industries.
And what does the decision mean for the importers?
For them, the interest rate move by the ECB is another concern. Because the strong Swiss franc against the euro makes importing goods from the euro zone cheaper and therefore more attractive. But in turbulent times with record-high inflation rates, even that is no longer a real trump card. “Inflation in the euro area is eating away at every exchange profit!” Kaspar Engeli (58), director of the umbrella organization for trade in Switzerland, recently told Blick. Escalating transport costs, disrupted supply chains and the shortage of skilled workers are bothering him and his members. Now a strengthening euro should also be added.