Interest rates are rising again: these are the winners and losers

This means an interest rate move

The majority of economists are of the opinion that the Central Bank will increase the policy rate from 1.75 percent to 2 percent this week. “Thomas Jordan will not take any chances and will prefer to take too many steps rather than too few,” says Fredy Hasenmaile (56), chief economist at Raiffeisen Switzerland. “It is too early to leave aside the interest rate tool in the fight against inflation.”

Felix Brill, 43, investment manager at VP Bank in Liechtenstein, also sees the situation this way: “Jordan will not raise interest rates with great enthusiasm again, but for a prescient reason.”

The annual inflation rate in Switzerland is 1.6 percent, thus within the framework of the Central Bank’s target of zero to two percent price stability. However, the next rise in inflation is at the door: The announced rent increases will be valid from October 1 and housing will become more expensive. Additionally, the prices of many foods increased by more than two percent in August.

Last interest rate increase

Ultimately, other upcoming price increases will not increase inflation further. For example, electricity prices will increase sharply again as of January 1, 2024. However, since electricity has become more expensive this year, this slightly milder increase actually has a reducing effect on inflation.

“This will probably be the last step of the interest rate cycle,” Hasenmaile reassures. All other observers see it that way too. Even the VAT increase agreed to finance the AHV or increased public transport prices will not significantly increase inflation. “As of February 2024, inflation will fall below two percent again.”

The franc is unlikely to gain further value against the euro, as the ECB raised its key interest rate just last week. Because if there is an increase in Switzerland, the interest difference between the franc and the euro will remain as large as before.

He opposes this interest rate increase

However, the Central Bank is always ready for surprises. “It’s a very close call,” says Nadia Gharbi, 37, of Pictet Asset Management. The economist points out, first of all, that the Swiss economy is weakening and its growth stopped completely in the second quarter. However, it is too early to “declare victory in the fight against inflation”.

Only Karsten Junius (55), chief economist at Safra Sarasin, disagrees: “Switzerland does not need another interest rate increase right now.” Unlike the euro area, inflation expectations are already low in Switzerland. “The Central Bank’s reputation as an inflation fighter is impeccable,” Junius said, and asked: “Why would the SNB now risk further weakening the Swiss economy?”

Winner and Loser

Savers may especially be happy about the interest rate increase. This means banks no longer have an excuse not to significantly increase savings rates. Consumers might be happy, too: If Jordan’s plan works, food prices could fall in the medium term.

Interest rate increases have negative consequences for housing rental. The benchmark interest rate will continue to rise, particularly as cheaper fixed-rate mortgages expire and are replaced by more expensive mortgages. Saron mortgage holders are likely to be particularly upset. Starting next Friday, housing will become more expensive for them.