ZURICH (Reuters) – The Swiss National Bank (SNB) raised its key rate by 50 basis points on Thursday and assured that the support measures for Credit Suisse, acquired by UBS as part of an emergency rescue plan, had “put an end to the crisis” in the financial markets.
In its monetary policy statement, the SNB indicated that further rate hikes could not be ruled out and that it was ready to be active in the foreign exchange market if necessary.
“The measures announced this weekend (…) have put an end to the crisis”, is it also indicated in the press release. “The SNB provides substantial liquidity in Swiss francs and foreign currencies.”
With Thursday’s hike, the SNB’s key interest rate is raised to 1.5%, the fourth consecutive hike, suggesting that the fight against inflation is currently outweighing financial market concerns.
The European Central Bank (ECB) also opted on March 16 to raise its rates by 50 basis points despite fears about the stability of the banking system, while the American Federal Reserve (Fed) decided on Wednesday to limit to 25 basis points the increase in the cost of credit.
The Bank of England (BoE) is due to publish its monetary policy statement at 12:00 GMT and a rate hike of 25 basis points is expected.
UPPERSPECTIVES FOR GDP GROWTH
Inflation in Switzerland is currently at 3.4% against a target of between 0% and 2% set by the SNB.
“Growth prospects for the global economy over the coming quarters remain weak,” writes the SNB. “At the same time, inflation is expected to remain elevated globally for the time being,” the bank added.
The SNB rate hike is in line with the expectations of the majority of economists polled by Reuters.
Regarding GDP forecasts, the SNB said it now expects the Swiss economy to grow by 1% this year, compared to an increase of around 0.5% in its December forecast.
Inflation, meanwhile, is expected to decline to 2.6% this year, then to 2% in 2024 and 2025.
“Without today’s key rate hike, inflation expectations would be even higher over the medium term,” the SNB said.
A majority of economists expect the SNB to continue raising rates in the face of persistent inflation.
(Report John O’Donnell and John Revill; Claude Chendjou, edited by Kate Entringer and Blandine Hénault)
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