Global Courant
The offices of the Swiss National Bank (SNB) ahead of the bank’s press conference on the rate announcement in Zurich, Switzerland, on Thursday, March 23, 2023.
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The Swiss National Bank opted for a smaller rate hike at its quarterly monetary policy meeting on Thursday, but said further hikes may be needed to bring inflation on target.
The SNB announced an increase of 25 basis points, bringing the policy rate to 1.75% in line with expectations.
It is the fifth consecutive hike since interest rates began to pull out of negative territory in June 2022, despite 50 basis point increases previously being made.
Inflation in Switzerland fell from 2.6% in April to 2.2% in May, well below neighboring countries in the Eurozone, where inflation averages 6.1%.
However, the SNB said in a statement that it was “countering inflationary pressures, which have picked up again in the medium term”. It aims for an inflation rate of less than 2%.
“It cannot be ruled out that additional increases in SNB policy rates will be necessary to ensure price stability in the medium term,” the central bank said, adding that it would take action in the foreign exchange market if necessary and would focus on the sale of foreign currencies. currency to ensure monetary stability.
Although the SNB tried at the beginning of last year dampen the rise of the Swiss franc as it gained amid market volatility focused now selling in foreign currency to increase its value in an effort to reduce import costs.
The SNB expects inflation to fall to 1.7% in the third quarter, before rising to 2% in the fourth, and gradually creep up a few percentage points in 2024 due to second-round effects and some domestic inflationary pressures such as rents.
“This upward revision of the forecasts is a particularly aggressive signal and suggests that the SNB will raise interest rates again,” economists from the Dutch bank ING said in a note.
At a time when other central banks seem to have lost confidence in their models and look primarily at actual inflation, the SNB seems to be taking a different approach by focusing primarily on inflation forecasts.
“After September, the SNB rate is likely to remain at 2%, with a rate cut between now and 2026 looking unlikely.”
The SNB has been in the spotlight in recent months for its role in facilitating the emergency takeover of Credit Suisse by UBS.
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