Swiss Central Bank There is a need to raise interest rates
The Swiss National Bank may need to tighten its monetary policy further depending on how inflation develops in the country, said Martin Schlegel, Vice President of the Swiss National Bank, in an interview published in the Swiss newspaper Sonntagsblick. The Swiss Central Bank last month kept interest rates unchanged at 1.75%, indicating that inflation – at 1.6% in August and within the central bank’s target range of 0-2% – had eased.
“It cannot be ruled out that further monetary policy tightening may be necessary,” Schlegel was quoted as saying. “This depends on how inflation develops.” However, the vast majority of economists polled last month said the SNB had finished raising rates. Interest rate Schlegel said that growth is likely to be weak next year, and unemployment is expected to rise slightly. The Swiss franc reached its strongest level since 2015 against the euro last Friday, against the backdrop of investors’ aversion to risk in the Middle East, as well as weakness. Broadband in the euro.
“Our country is seen as so stable that our currency appreciates in times of crisis,” Schlegel said. But this of course also has undesirable consequences. This makes it more difficult for export companies to succeed in economically unstable times.” Schlegel added that the central bank was drawing lessons from the government’s move to support the Credit Suisse rescue deal in March, which shook the Swiss banking sector and caused broader market panic. He said: “One lesson is certainly that Credit Suisse’s liquidity flowed much faster than regulators in Switzerland and abroad had expected.”
The strength of the Swiss franc
He also said that the AT1 bonds, which were written off as part of UBS’s takeover of Credit Suisse, should have incurred losses at an earlier stage. “Despite the continuing losses, Credit Suisse has not suspended interest payments on these instruments,” Schlegel said. “This meant immediate financial relief for the bank, as the rate of increase in energy prices in Switzerland reached about 16.2 percent in the year 2022,
The Swiss franc is supported by a large reserve of gold, bonds and financial assets, which helps the Swiss National Bank to ensure the stability of the currency in times of volatility. The value of the franc rose to become equal to the euro during the year 2022, in evidence of its strength, especially since many currencies fell into the trap of a sharp decline against the US dollar in light of the economic conditions that the world experienced during the past year.
The Fed raises interest rates for the ninth time in a row. The US Federal Reserve had decided to raise key interest rates by 25 basis points, in line with expectations, to reach a range between 4.75 and 5 percent at the highest level since September 2007, that is, before the global financial crisis. The markets were closely awaiting the Federal Reserve’s decisions today, after the recent turmoil in the banking sector, which led some to ask the US central bank to postpone the interest rate increase so as not to add more pressure on the banks. The US Federal Reserve indicated in its statement that it may take further decisions to tighten monetary policy, stressing that inflation is still high
The banking crisis that is ravaging global markets
Indicating that he has not yet finished increasing interest rates, despite the risk of worsening the banking crisis that is ravaging global markets This is the ninth consecutive increase approved by the Federal Reserve since last year in an attempt to curb inflation, which in 2022 reached its highest levels in about 4 decades, before gradually declining and reaching 6 percent last February on an annual basis.
Switzerland is considered one of the countries least affected by the external factors that were the main cause of the rise in inflation in Europe during the year 2022, such as the war in Ukraine, given that it relies less on oil and gas imports from some European countries, where hydroelectric energy plays an important role in supplying it. With energy.
Bundesbank President Joachim Nagel believes that core inflation measures that exclude energy and food will not slow quickly in Europe, which necessitates continuing the path of raising interest rates in the euro zone in September. On the sidelines of the G7 meetings, Nagel said that the data does not allow us to think about changing our view that further rate hikes will be necessary, and this also applies after the summer vacation.