Now, Swiss central bank hikes rate

The Swiss central bank announced a hefty interest-rate hike to tackle inflation despite turmoil in the banking sector on Thursday, declaring that authorities halted the crisis at Credit Suisse.

The Swiss National Bank said interest rates would rise by 50 basis points to 1.5 per cent after a turbulent week, which saw the stricken Credit Suisse bank taken over by its bigger domestic rival UBS.

The central bank, the Swiss government and the country’s FINMA financial regulators orchestrated the shotgun wedding in emergency talks on Sunday.

“The Swiss National Bank is tightening its monetary policy further and is raising the SNB policy rate by 0.5 percentage points to 1.5 per cent,” the central bank said in a statement.

“In doing so, it is countering the renewed increase in inflationary pressure. It cannot be ruled out that additional rises in the SNB policy rate will be necessary to ensure price stability over the medium term.” The rate change will apply from Friday, it said.

“The past week has been marked by the events surrounding Credit Suisse. The measures announced at the weekend by the federal government, FINMA and the SNB have put a halt to the crisis,” the SNB said.

The central bank in Zurich said inflation had risen again since the beginning of the year and stood at 3.4 per cent in February.

“It is therefore still clearly above the range the SNB equates with price stability,” it said.

The bank said the latest rise in inflation was principally due to higher prices for electricity, tourism services and food.

“The new forecast puts average annual inflation at 2.6 per cent for 2023,” it said.

The central bank also said Swiss GDP stagnated in the fourth quarter of 2022. It said the services sector lost momentum, and value added in manufacturing declined slightly again.