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SNB and BoE follow other central banks with hikes

The Swiss National Bank (SNB) and Bank of England (BoE) both forged ahead with rate hikes on Thursday, despite signs of financial sector instability emerging around the world. The moves - 50 basis points in Switzerland and 25 basis points in the UK - echo hikes by the European Central Bank last week (50 basis points) and the US Federal Reserve (25 basis points) on Wednesday. The unified increases come in the face of financial instability stemming partially from higher rates in recent weeks, with three US banks collapsing and Swiss banking giant Credit Suisse being acquired by rival UBS.

Alessandro Fezzi, LGT
Tempo di lettura
5 minuto
SNB building
© Shutterstock

SNB President Thomas Jordan made it clear that more rate hikes are possible this year, if needed to contain inflation. The rate of consumer price increases in Switzerland unexpectedly reversed its falling trend in January. While inflation near 3% in Switzerland is much lower than in neighbouring European countries, Switzerland is still affected by the tense energy situation on the continent. By following the ECB with a 50-basis point move, the SNB has signalled along with other major central banks that it is determined to fight inflation even if high rates pose a challenge for the financial sector. Nevertheless, SNB head Jordan said the situation at Credit Suisse was critical, and an all-out bankruptcy would have had grave consequences for the international financial sector and Swiss economy.

Later Thursday, the Bank of England became the latest central bank to increase rates, raising its benchmark lending rate to 4.25%. Unlike Switzerland, which enjoys some of the lowest inflation in Europe, data released Wednesday showed British consumer prices were up 10.4% year-on-year in February.

In New York, stock indices ended Wednesday’s trading session in positive territory after new comments from Treasury Secretary Janet Yellen on the nation’s banking crisis. On Wednesday, Yellen had ruled out sweeping guarantees for US bank deposits, but then said Thursday that US authorities still have tools available to them avert a banking crisis, without providing details as to what those tools are. The Dow Jones Industrial was up 0.2% to end at 32,105.25 points and the S&P 500 gained 0.3% to close at 3,948.72 points. On the Nasdaq, the major tech indices increased by around 1.3%.

Markets in Asia showed a more mixed picture on Friday. In Japan, the Nikkei was trading down 0.3% and South Korea’s Kospi lost 0.7%. In Hong Kong, the Hang Seng Index fell 0.2% but the Hang Seng Tech Index gained 1.3%. In mainland China, the Shanghai Composite lost 0.5% and the Shenzhen Component rose 0.2%.

Corporate news in focus: No major corporate news scheduled for Friday.

Economic data in focus: Purchasing Managers Indices (PMI) from Germany (09:30 CET), euro area (10:00 CET), UK (10:30 CET) and the US (14:45 CET) as well as second day of European Council’s two-day summit in Brussels.

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Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
Editor: Alessandro Fezzi,
Source: LGT Bank (Switzerland) Ltd.