The Swiss central bank raises interest rates by 50 basis points despite Credit Suisse turmoil

The Swiss national flag hangs from the Federal Palace, Switzerland’s parliament building, in Bern, Switzerland, Thursday, Dec. 13, 2018. The Swiss National Bank cut its inflation forecast and showed no inclination to move from crisis-era settings, citing the franc’s strength and rising global risks. Photographer: Stefan Wermuth/Bloomberg via Getty Images

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The Swiss National Bank raised its benchmark interest rate by 50 basis points on Thursday, taking it to 1[ads1].5%.

The interest rate is the fourth increase in a row and the change in the policy rate is in line with analysts’ expectations.

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The Swiss central bank raises interest rates by 50 basis points despite Credit Suisse turmoil


The additional monetary policy tightening has been implemented to counteract “the renewed increase in inflationary pressure”, the bank said in a press release.

It also said that further increases “cannot be ruled out … 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 from 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% in February year-on-year, beating analysts’ expectations, although consumer prices are only a fraction of the soaring rates of the country’s European neighbours.

The country’s interest rates first moved out of negative territory in September, and the Swiss central bank had surprised 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 policy rate will be necessary to ensure price stability in the medium term,” said a press release from the central bank in December.

“To provide appropriate monetary conditions, the SNB is also willing to be active in the foreign exchange market as needed,” it added.

The Swiss National Bank has been in the global spotlight for the past week after it agreed to lend lender Credit Suisse up to 50 billion Swiss francs ($53.68 billion). Shares in the lender had fallen on news that its biggest investor, Saudi National Bank, would not provide further financial assistance.

The resulting liquidity lifeline and UBS takeover came after a tumultuous series of scandals and losses for Swiss credit.

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