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ECONOMY

How Switzerland’s interest rate hike might affect you

The Swiss National Bank (SNB) raised its key rate on Thursday, not ruling out further increases “to ensure price stability in the medium term". What effect could this have on consumers?

Published: 23 March 2023 12:56 CET
Updated: 25 March 2023 09:07 CET
How Switzerland's interest rate hike might affect you
Swiss National Bank headquarters in Bern. Photo by Fabrice COFFRINI / AFP

“The SNB is tightening its monetary policy further and is raising policy rate by 0.5 percentage points to 1.5 percent,” the central bank said in a press release on Thursday.

In doing so, the SNB “is countering the renewed increase in inflationary pressure,” the bank added.

The rate change will go into effect from Friday, March 24th, 2023.

With this latest hike, the SNB’s key interest rate goes up for the fourth time in a row, suggesting that the fight against inflation is currently outweighing financial market concerns with the emergency takeover of Credit Suisse by UBS.

“Inflation has risen again since the beginning of the year, and stood at 3.4 percent in February. It is therefore still clearly above the range the SNB equates with price stability,” the bank said.  

It added that Switzerland is not the only country where key rates are increased.

“The global economy hardly grew in the fourth quarter, while in many countries inflation remained clearly above central banks’ targets. Against this background, numerous central banks have tightened their monetary policy further,” the SNB pointed out.

Also, the forecast calls for “further inflationary pressure from abroad.”

“Growth prospects for the global economy over the coming quarters remain weak. At the same time, inflation is expected to remain elevated globally for the time being,” the bank added.

The SNB has also raised its inflation projections for Switzerland for the current year, as well as for 2024, to 2.6 percent and 2.0 percent, respectively.

In September 2022, its outlook called for 2.4 percent for 2023 and 1.7 percent for 2024. 

“The inflation is likely to remain at the very top of the range considered acceptable for monetary stability in 2025 as well,” the bank said.

However, by international comparison, the SNB’s key interest rate remains relatively low.

The European Central Bank recently raised its rates to between 3 and 3.75 percent. The Fed, the US central bank, upped rates to between 4.75 and 5 percent.

What does this hike in interest rates mean for you?

It depends on what, if anything at all, you are looking to buy.

If you are planning to get big-ticket items that are usually purchased with credit — like homes — then you may have to dig deeper into your pockets.

If you already have a fixed-rate mortgage, then you are safe from rate increases for its term.

If not, rates could go up, though it is not clear by how much.

But it is not all bad news; higher interest rates will yield some benefits as well.

For instance, if you have certain types of investments — such as bonds and other fixed-income financial products — you may see more money coming in.

And if you have a bank account, you can expect to see a higher yield on your assets, though the actual increase depends on several factors, such as what bank you use and what kind of accounts you have there. 

READ MORE: Which Swiss banks offer the highest interest rates on savings?

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For members

HEALTH

Reader question: Do I have to pay for prescription drugs in Switzerland?

Generally speaking, medications prescribed by a doctor are covered by healthcare insurance. But this doesn’t mean you won’t have to pay any costs at all.

Published: 30 May 2023 16:29 CEST
Reader question: Do I have to pay for prescription drugs in Switzerland?

As is the case everywhere else, there are two types of medicines in Switzerland: those you buy without a prescription (over-the-counter — OTC) and those who are by doctor’s orders only.

As a general rule, compulsory health insurance (KVG in German and LaMal in French and Italian) reimburses medicines prescribed by a doctor, as long as they are included on the list of drugs officially approved by Switzerland’s regulatory body, Swissmedic — in total, about 2,500 medications.

The list is quite extensive, comprising not only brand-name and generic meds but also many biosimilars — medicines that are almost an identical copy of an original product manufactured by a different company.

Also covered are some alternative-medicine drugs, including homeopathy and physiotherapy. 

What happens when a doctor prescribes a drug that is not authorised in Switzerland?

In principle, the compulsory health insurance will not cover the costs and you will have to pay for it yourself.

However, there are exceptions to this rule.

For instance, even if a particular medication is not approved in Switzerland, but is imported from a country where it is authorised by a body that is considered equivalent to Swissmedic (for example, the European Medicines Agency), then KVG / LaMal will pay for it.

Also, if the cost of a drug is not covered by the compulsory health insurance, and you have taken out a complementary policy, it is possible the latter will pay for it.

These insurance providers have their own lists of medicines which they cover, though certain conditions and limitations may apply.

In general, neither basic nor supplementary insurance will pay for so-called  Pharmaceuticals for Special Application (LPPA). This list mainly includes “comfort” products, for example appetite suppressants or products that reduce hair loss.

READ ALSO: Should you buy supplemental health insurance in Switzerland?

How much of the cost does insurance pay?

As is the case for medical treatments in general, KVG / LaMal will pay 90 percent of the cost of medication for which no generics exist.

If, however, an equivalent generic drug is available, but you still choose the brand medicine, then your insurance carrier will cover 80 percent of the price. This means that you will have to pay either 10 or 20 percent of the cost yourself.

This will happen until you use up our entire deductible (franchise), in addition to your 10-percent share of the costs that exceed the deductible — a maximum of 700 francs per year for adults and 350 francs for children.

If you have a low deductible (300 francs), this means that once you use up 1,000 francs toward your medical costs (doctor’s visits, treatments, and medicines combined), you will then not have to pay anything toward your prescription drugs.

By the same token, if you have chosen the highest franchise — 2,500 francs — and add to it the 700-franc co-pay, you may never get to the point where all your medications will be completely covered by the insurance.

READ ALSO: Which Swiss health insurance deductible makes most sense?

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