Swiss National Bank raises rates, says bank crisis stopped

Chairman Thomas Jordan of the Swiss National Bank (SNB) attends a news conference in Zurich, Switzerland, March 23, 2023. REUTERS/Denis Balibouse

ZURICH  -The Swiss National Bank raised its benchmark interest rate by 50 basis points on Thursday and declared that measures to support Credit Suisse had “put a halt to the crisis”.

The central bank said that additional rate rises could not be ruled out and that it was willing to be active in the foreign exchange market if necessary.

“The measures announced at the weekend … have put a halt to the crisis,” it said in a statement. “The SNB is providing large amounts of liquidity assistance in Swiss francs and foreign currencies.”

The rates increase was the SNB’s fourth hike in succession as the central bank maintained its fight against Swiss inflation, which remains stubbornly outside the SNB’s target band of 0 -2 percent.

“The growth outlook for the global economy in the coming quarters remains subdued,” said the SNB in a statement. “At the same time, inflation is likely to remain elevated worldwide for the time being.”

The Swiss move matched the European Central Bank’s (ECB) 50 basis point increase last week.

The U.S. Federal Reserve on Wednesday raised its main interest rates by a quarter of a percentage point, but indicated it was on the verge of pausing further increases.

The Bank of England is expected to increase its interest rate by a quarter percentage point later on Thursday.

The Swiss rate hike was in line with the majority of economist forecasts according to a Reuters poll and showed how tackling inflation – currently running at 3.4 percent – outweighed its concerns over financial market turmoil.

The Swiss National Bank (SNB) building is seen near the Limmat river in Zurich, Switzerland March 23, 2023. REUTERS/Denis Balibouse

The central bank also adjusted its economic forecasts. It said it now expected the Swiss economy to grow by 1 percent this year, adjusting its December forecast for an increase of around 0.5 percent.

Inflation meanwhile is expected to be 2.6 percent in 2023, 2 percent in 2024 and 2025, the SNB said.

“Without today’s policy rate increase, the inflation forecast would be even higher over the medium term,” the central bank said.

Economists expect the SNB to continue hiking rates as it battles inflation in Switzerland.

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