SNB interest rates are likely to rise further

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If the SNB continues to really tighten interest rates, this will be the fourth consecutive rate hike. The Swiss key interest rate is currently +1.00%. It was still clearly in the red last June with a score of -0.75, but has been positive again since September.

In fact, until recently it was clear that new rate hikes were imminent: although inflation in Switzerland is lower than in Europe or the US, it is still very high and the Central Bank has to deal with it by raising more rates.

Inflation has risen sharply again in the last two months, at 3.4 percent, well above the SNB’s target range of 0 to 2 percent. The increase in electricity prices and the increase in the prices of flights and package tours were effective in the recent increase.

Raiffeisen’s Alexander Koch said inflation rose more sharply than the SNB had expected at the beginning of the year. That’s why President Thomas Jordan underlined that more needs to be done before the March meeting. Therefore, a 50 basis point rate hike is more likely.

Economists at UBS also expect a 50 basis point rate hike. Improved economic prospects, higher inflationary pressure, especially when it comes to core inflation, and the ECB’s rate hikes last week and already in February speak for this, according to lead expert Alessandro Bee. Even other augurs assume a rate increase of 75 basis points.

However, inflation is not the only thing causing fear and terror lately. The bankruptcy of three midsize US financial institutions Silicon Valley Bank and Signature Bank Silvergate Capital last week triggered shock waves in the international banking and financial system, where major bank Credit Suisse has long been in crisis. , caught – which, as it is known, resulted in the takeover of UBS by the streamer.

And this new banking crisis, which has already reminded some market participants of the 2008/09 financial crisis, is now putting many central banks in a dilemma. To further combat inflation, they would actually have to raise interest rates. On the contrary, an interest rate cut would be appropriate to stabilize the system. One of the main reasons for the stress in the system is the recent sharp rise in interest rates.

Karsten Junius of Safra Sarasin assumes that SNB will solve the two problems by separating them as much as possible. This, in turn, could defend its willingness to raise interest rates by 50 basis points and, if necessary, provide additional liquidity limits, similar to what the ECB did at its Thursday meeting.

The US Federal Reserve made its next interest rate decision on Wednesday evening local time and thus shortly before the SNB decision on Thursday morning.

However, according to experts, it is quite possible that the SNB will change its stance due to the dilemma. Daniel Lüchinger from the Graubündner Kantonalbank (GKB) points out this. The week we left behind showed that interest rate hikes by central banks will not adversely affect the global economy. Gradually the effects are now visible. Therefore, he believes there are some signs that central banks are acting more cautiously as a result of recent events.

(SDA)

Source :Blick