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Swiss National Bank hikes key rate by 50bps to 1.5%, says more may be needed

Published 23/03/2023, 08:06 pm
Updated 23/03/2023, 08:06 pm
© Reuters.

By Geoffrey Smith -- The Swiss National Bank (SIX:SNBN) raised its key rate by 50 basis points and warned that further hikes may be necessary, shrugging off risks to the financial sector and to economic growth from the collapse of Credit Suisse (SIX:CSGN) last week.

"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 bank said, adding that further sales of its foreign currency reserves to support the franc are also possible.

The bank's announcement comes less than a week after the SNB, regulator FINMA, and the federal government forced through a hasty sale of Credit Suisse to rival UBS (SIX:UBSG), aiming to stop a disorderly collapse that would have devastated the international reputation of Switzerland as a haven of financial stability.

The SNB devoted only one brief paragraph in its statement to that episode, saying tersely that "The measures announced at the weekend by the federal government, FINMA and the SNB have put a halt to the crisis. The SNB is providing large amounts of liquidity assistance in Swiss francs and foreign currencies. These loans are backed by collateral and subject to interest."

Swiss inflation stood at 3.4% in February, "principally due to higher prices for electricity, tourism services and food," the SNB said. "However," it added, "price increases are now broad-based."

The SNB expects inflation to return to just over 2% by the end of 2025, while it expects growth of a modest 1% this year.

The franc rose against the dollar after the SNB's statement, on expectations that the bank will find it easier than the Federal Reserve to raise rates any further, given the greater concerns about financial stability in the U.S.

By 04:50 ET (08:50 GMT), the dollar fetched CHF 0.9130, down 0.5% on the day.

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