Switzerland and Norway hiked interest rates on Thursday to tackle inflation despite banking-sector turmoil, with the UK’s central bank next in line after the US Federal Reserve also lifted borrowing costs.
The Swiss National Bank, which helped oversee the recent UBS buyout of troubled Credit Suisse, lifted its key rate as expected by a hefty 50 basis points to 1.5 percent.
Norway’s central bank followed suit moments later, hiking its rate by a more modest 25 basis points to 3.0 percent after its policymakers concluded that “a higher policy rate is needed to curb inflation”.
The Bank of England is forecast to join them in hiking rates in the face of stubbornly-high inflation — and as markets remain jittery over turmoil in the global banking sector.
“The SNB is tightening its monetary policy further… In doing so, it is countering the renewed increase in inflationary pressure,” the Swiss institution said in a statement.
The Fed decided Wednesday to push up interest rates by a quarter of a percentage point, or 25 basis points.
While the Fed hiked its rate despite banking turmoil, analysts say its accompanying statement signalled it may soon pause its monetary tightening.
The Fed statement replaced a previous warning that “ongoing increases … will be appropriate” to tame inflation with a conditional one saying “some additional policy firming may be appropriate”.
Recent banking sector developments “are likely to result in tighter credit conditions for households and businesses and to weigh on economic activity, hiring and inflation,” the Fed added.
The Swiss rate call, which matching the last increase in December, comes just a few days after the SNB joined other major central banks in boosting liquidity in the wake of the latest banking crisis.
Switzerland at the weekend had brokered the takeover of crisis-hit Credit Suisse by its Swiss rival UBS.
The buyout followed the collapse this month of Silicon Valley Bank and Signature Bank in the United States, which sent shockwaves across global markets.—AFP