The Swiss Central Bank stated that an additional rate hike will be necessary to guarantee price stability during the medium term
Swiss Central Bank increased its central interest rate on Thursday and announced an end to the country’s banking crisis. The decision to increase the interest rates is an indication of the central bank’s efforts to bring inflation under control despite the fact that the banking sector is suffering greatly. The Swiss Central Bank has increased its interest rate by a half percentage point to 1.5%. This was a move expected by economists and analysts before Switzerland was directly affected by the banking strains that happened in the United States. Later this year, the possibility of another increase in key rates is around the corner, according to the indications by the central bank.
The Swiss Central Bank stated that an additional rate hike will be necessary to guarantee price stability during the medium term. The central bank earlier this week assisted in taking over Credit Suisse by UBS Group after depositors withdrew funds from Credit Suisse. Credit Suisse was weakened by several years of trading losses and self-imposed scandals.
The core inflation, which ignores unpredictable items such as the food and energy rate of the country reached a record high during February when the overall rate of inflation reached the highest level since August 2022, the consumer prices in Switzerland are also increasing by international standards. UBS’s takeover of Credit Suisse had put an end to the crisis, reported the Swiss National Bank. According to the reports of WSJ, bank supervisors, and central bankers from across the globe including the representatives from SNB, Fed, and Bank of England stated that they would keep an eye on the developing outlook on the matter.
The Basil committee in a statement reported that there were years of unprecedentedly low-interest rates and leverage buildup across corporate sectors and households. “As most central banks raise interest rates to combat inflation, borrowers are now facing sharply rising debt service burdens. A broad-based repricing in asset markets could also expose banks to additional risks,” stated the report. Apart from the Swiss Central Bank, Norway also increased its core interest rate on Thursday by a quarter percentage point to 3%. Norges Bank also stated that it would increase the interest rates soon.
Norges Bank Gov. Ida Wolden Bache stated that there is a looming uncertainty about future economic developments. “But if developments turn out as we now expect, the policy rate will be raised further in May,” stated Ida Wolden Bache. The bank of England, on the other hand, is yet to announce a decision on Thursday. With the economic struggles, rising inflation along with unsettling events in the global banking environment, investors had expected the UK central bank to keep its core rates unaffected. But there are increased chances of a rate increase as there is a clear increase in inflation rates.