Swiss central bank raises rates by 50 bps despite Credit Suisse concerns
The Swiss central bank raised its benchmark interest rate by 50 basis points on Thursday, taking it to 1.5%. The rate is the fourth consecutive increase and the change in the policy rate is in line with analysts’ expectations.
The additional monetary policy tightening has been introduced to counter “the renewed increase in inflationary pressures”, the bank said in a press release. It also said that further increases “cannot be excluded … to ensure price stability in the medium term.”
Average annual inflation will average 2.6% in 2023 and 2% in 2024 and 2025, according to a new forecast by the Swiss National Bank, with inflation expected to reach 2.1% by the end of 2025.
The latest rate hike comes as domestic inflation remains well above the Swiss National Bank’s target of between 0% and 2%.
Swiss inflation rose to 3.4 percent in February year-on-year, exceeding analysts’ expectations, although consumer prices are only a fraction of the sky-high rates of the country’s European neighbors.
The country’s interest rates first moved out of negative territory in September, and the Swiss central bank had surprised the markets in June when it raised interest rates for the first time since 2007.
The Swiss National Bank had hinted that further rate hikes could be on the horizon if inflationary pressures continued.
“It cannot be ruled out that further increases in the SNB’s key interest rate will be necessary to ensure price stability in the medium term,” the central bank said in a December press release.
“To provide appropriate monetary conditions, the SNB is also willing to be active in the foreign exchange market if necessary,” it added.
The Swiss National Bank has been in the global spotlight over the past week after it agreed to lend strained lender Credit Suisse up to 50 billion Swiss francs ($53.68 billion). Shares in the lender had plummeted on news that its largest investor, the Saudi National Bank, would not provide further financial support.
The resulting liquidity rescue and UBS takeover came after a tumultuous series of scandals and losses for Credit Suisse.
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