Swiss National Bank hikes interest rates by 50 bps despite Credit Suisse fall, turmoil in financial sector
This is the fourth consecutive hike in the last one year and the change in policy rate is in line with analyst expectations.
- Mar 23, 2023,
- Updated Mar 24, 2023 9:30 PM IST
The Swiss National Bank on Thursday morning announced it would raise its benchmark interest rate by 50 basis points, taking it to 1.5 per cent for now. This is the fourth consecutive hike in the last one year and the change in policy rate is in line with analyst expectations.
On Wednesday, a Reuters poll of economists showed that the Swiss National Bank is expected to follow European Central Bank's move last week in a bid to tame the high inflation despite the turmoil in the financial market.
In a press release, the central bank on Thursday said: “The additional monetary tightening has been put in place to counter the renewed increase in inflationary pressure.”
It added that further hikes “cannot be ruled out ... to ensure price stability over the medium term.”
Average annual inflation will average 2.6 per cent in 2023 and 2 per cent in 2024 and 2025, according to a new forecast by the Swiss National Bank, with inflation expected to stand at 2.1 per cent by the end of 2025. The domestic inflation at present is well above the Swiss National Bank’s target of between 0 per cent and 2 per cent.
Swiss inflation rose to 3.4 per cent in February year-on-year, exceeding analyst expectations, although consumer prices are just a fraction of the soaring rates of the country’s European neighbours, the note said.
Last one week, the Swiss National Bank has been in the global spotlight after it first agreed to lend embattled lender Credit Suisse up to $53.68 billion. Credit Suisse’s shares slipped to a new low after its biggest investor, Saudi National Bank, said it would not provide further financial assistance.
On Wednesday, the US Federal Reserve hiked its interest rates by a quarter of a percentage point, or 25 basis points despite banking turmoil. Fed on Wednesday replaced its previous hawkish warning that "ongoing increases ... will be appropriate" to tame inflation with a conditional one saying "some additional policy firming may be appropriate".
On Wednesday, Fed said: “Recent banking sector developments are likely to result in tighter credit conditions for households and businesses and to weigh on economic activity, hiring and inflation."
Last week even the European Central Bank announced a rate hike of 50 basis points. In its note it said it is ready to supply liquidity to banks if needed, amid recent turmoil in the banking sector. Earlier, the ECB signaled for several weeks that it would be raising rates again at its March meeting, as inflation across the 20-member region remains sharply above the targeted level.
In February, preliminary data showed headline inflation of 8.5 per cent, well above the central bank’s target of 2 per cent.
The Swiss National Bank on Thursday morning announced it would raise its benchmark interest rate by 50 basis points, taking it to 1.5 per cent for now. This is the fourth consecutive hike in the last one year and the change in policy rate is in line with analyst expectations.
On Wednesday, a Reuters poll of economists showed that the Swiss National Bank is expected to follow European Central Bank's move last week in a bid to tame the high inflation despite the turmoil in the financial market.
In a press release, the central bank on Thursday said: “The additional monetary tightening has been put in place to counter the renewed increase in inflationary pressure.”
It added that further hikes “cannot be ruled out ... to ensure price stability over the medium term.”
Average annual inflation will average 2.6 per cent in 2023 and 2 per cent in 2024 and 2025, according to a new forecast by the Swiss National Bank, with inflation expected to stand at 2.1 per cent by the end of 2025. The domestic inflation at present is well above the Swiss National Bank’s target of between 0 per cent and 2 per cent.
Swiss inflation rose to 3.4 per cent in February year-on-year, exceeding analyst expectations, although consumer prices are just a fraction of the soaring rates of the country’s European neighbours, the note said.
Last one week, the Swiss National Bank has been in the global spotlight after it first agreed to lend embattled lender Credit Suisse up to $53.68 billion. Credit Suisse’s shares slipped to a new low after its biggest investor, Saudi National Bank, said it would not provide further financial assistance.
On Wednesday, the US Federal Reserve hiked its interest rates by a quarter of a percentage point, or 25 basis points despite banking turmoil. Fed on Wednesday replaced its previous hawkish warning that "ongoing increases ... will be appropriate" to tame inflation with a conditional one saying "some additional policy firming may be appropriate".
On Wednesday, Fed said: “Recent banking sector developments are likely to result in tighter credit conditions for households and businesses and to weigh on economic activity, hiring and inflation."
Last week even the European Central Bank announced a rate hike of 50 basis points. In its note it said it is ready to supply liquidity to banks if needed, amid recent turmoil in the banking sector. Earlier, the ECB signaled for several weeks that it would be raising rates again at its March meeting, as inflation across the 20-member region remains sharply above the targeted level.
In February, preliminary data showed headline inflation of 8.5 per cent, well above the central bank’s target of 2 per cent.