In a surprise move, the Swiss National Bank raised interest rates for the first time in 15 years as inflation continues to concern monetary policymakers and government officials around the world.

The Swiss central bank hiked both its benchmark policy rate and its sight deposit rate by 50 basis points to -0.25% from a global low of -0.75%.

The decision followed Wednesday’s 75bp hike from the US Federal Reserve, with its Swiss counterpart signalling a willingness to implement more increases if needed.

Frederik Ducrozet, head of macroeconomic research at Pictet Wealth Management, tweeted: “It's hardly a coincidence that the Fed, ECB, SNB or RBA all came up with surprise moves in the past week. It started with the IMF meetings, and there's been an implicit coordination since then.” Continue Reading 

“The Bank of England is walking an increasingly uncomfortable line between curbing inflation and tipping the economy into a recession, with the UK the global poster-child for stagflation. Today's fifth straight interest rate hike, by 0.25% to 1.25%, is being left behind by more determined central banks like the US Fed,” Ben Laidler, global markets strategist at eToro, warned.

“UK inflation is running at 9%, the highest among developed economies, and it's set to rise even further in the coming months given the October fuel price cap and the fact that natural gas prices are surging again this week. Meanwhile, unemployment is at 25-year lows and wage expectations are rising.

“The more gradualist approach by the Bank of England may spare some pain for the UK economy for now, but is keeping long term inflation expectations well above those in the US, and undermining Sterling. A weaker pound may be welcomed by many exporters and the FTSE 100, but it also supports high-for-longer inflation and hurts more domestic-focused mid-caps like the FTSE 250.”

The emergency meeting of the ECB today was to be anticipated given the dramatic widening of the Euro Area peripheral government bond spreads in the last couple of weeks. It is interesting to note that while the monetary policy normalization has been rather telegraphed for months. It is the precipitous change in language and tightening that created a violent reaction in bond markets.

If there is one first lesson to be learned is that it is generally bad policy to change a well-choreographed strategy and to abruptly end a framework that took time to develop. The blog by Christine Lagarde on May 26th was an elegant and clear-headed description of the way and it was disorienting to see it effectively come to an end as early as the June 9th Governing Council meeting. Continue Reading 

LONDON, June 16 (Reuters) - A markets sell-off has brought back memories of the euro zone debt crisis more than a decade ago, highlighting divisions that have plagued the currency bloc's efforts to forge a closer bond.

While the years since the debt crisis have seen the 19 countries in Europe's euro area centralise and toughen bank controls, many planned economic reforms in Italy and elsewhere were watered down as vast money printing buoyed the economy. Continue Reading