The Swiss National Bank on Thursday raised its benchmark interest rate to 0.5%, a shift that brings an end to an era of negative rates in Europe.
The 75 basis point hike follows an increase to -0.25% on June 16, which was the first rate rise in 15 years. Prior to this, the Swiss central bank had held rates steady at -0.75% since 2015.
It comes after inflation in Switzerland hit 3.5% last month — its highest rate in three decades.
The bank said raising the policy rate was "countering the renewed rise in inflationary pressure and the spread of inflation to goods and services that have so far been less affected."
It added that further policy rate increases "cannot be ruled out."
The hike is in line with economist expectations, according to a Reuters poll.
The Swiss franc dramatically weakened against the dollar and euro following the rate hike. At 9:15 a.m. London time, the dollar was 1.24% higher against the Swiss currency, and the euro was 1.6% higher.
Earlier this week, the Swiss franc hit its strongest level against the euro since Jan. 2015, as economists started to speculate about the prospect of a 75 basis points increase.
Switzerland had been the last remaining country in Europe with a negative policy rate as the region's central banks have been aggressively increasing rates to tackle soaring inflation.
Japan is now the last major economy with a central bank in negative territory, after the Bank of Japan decided to keep its interest rates on hold at -0.1% on Thursday.
Denmark, meanwhile, ended its almost decade-long negative rate streak on Sept. 8 when the central bank raised its benchmark rate by 0.75 percentage points to 0.65%.
Most recently, Sweden's central bank increased its interest rate to 1.75% on Sept. 20. The 100 basis point hike came as the Riksbank warned, "inflation is too high."
The European Central Bank moved above zero when it raised rates to combat soaring inflation on Sept. 8.
The ECB could continue to increase rates, but future rises won't be as drastic as the most recent 75-basis-point hike on Sept. 9, according to ECB Governing Council member Edward Scicluna.
