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Switzerland Monetary Policy March 2023

Switzerland: SNB raises rates by 50 basis points in March

At its meeting on 23 March, the Swiss National Bank (SNB) raised its policy rate from 1.00% to 1.50%.

As the SNB stated in its press release, the hike was aimed at counteracting inflation, which saw a surprise increase in February and is well above the SNB’s target of below 2%. Robust recent economic activity and a tight labor market likely also played a role. Regarding the recent takeover of Credit Suisse by UBS, the SNB judged that action from the authorities had “put a halt to the crisis”, leaving the central bank free to continue tightening monetary policy.

Looking ahead, the SNB reiterated guidance that it “cannot be ruled out that additional rises in the SNB policy rate will be necessary to ensure price stability”. The Consensus is for further monetary tightening later this year in order to bring inflation back down towards the target.

On the outlook, analysts at ING said:

“Fears about financial stability will have an impact on the availability of credit and thus on the economic situation and the inflation environment in the coming months, which will ultimately influence the path of interest rates […] We believe that a further rate hike is likely in June, but given the economic slowdown, which is likely to be exacerbated by concerns about the banking system, this hike is likely to be limited to 25bp to 1.75% and will probably be the last. After that, the interest rate is likely to remain at this level for a long period.”

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