The Swiss issuing institute raised its key rate by 50 basis points to bring it from 1.0% to 1.5%, it said in a press release on Thursday. It “does not rule out that further rate hikes are necessary to ensure price stability in the medium term”, warned the Swiss central bank.
With Thursday’s hike, the SNB’s key interest rate is raised to 1.5%, the fourth hike in a row, suggesting that the fight against inflation is currently outweighing financial market concerns with the emergency takeover, in particular, of Credit Suisse by UBS.
Inflation still a concern
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,” the institute writes. “At the same time, inflation is expected to remain elevated globally for the time being,” the bank added.
The bank has also raised its inflation projections by around twenty percentage points for the current year and the following year, to 2.6% and 2.0% respectively. The inflation is likely to remain at the very top of the range considered acceptable by the guarantor of monetary stability in 2025 as well.
Better on growth
Growth prospects, on the other hand, have improved, with the issuing institute predicting growth of around 1% in gross domestic product for 2023, twice as generous as expected so far. However, the projection exercise remains tainted by many uncertainties, in Switzerland and abroad.
On Wednesday evening, the US Federal Reserve (Fed) raised its rate by a quarter of a percentage point, seeking to balance its fight against inflation against the turmoil in the banking sector which, it warned, are likely to “weigh” on the economy. The Fed’s main policy rate is now in a range of 4.75% to 5.00%, the highest level since 2006, following a unanimous decision.
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The Fed, the American central bank, raises its key rate
A week ago, the European Central Bank (ECB) did the same, deciding to raise rates by another half a percentage point in order to combat inflation, judging that the banks of the euro zone were solid and “resilient”.
>> Frédéric Mamaïs’ analysis in Alter Eco before the decision
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