Swiss National Bank raised interest rates by 50 bps simultaneously, ignoring the recent Credit Suisse crisis.

On Thursday (March 23rd), the US dollar was the losing currency in trading. After being hit by the FOMC meeting announcement earlier in the morning, the USD was further pressured by the Swiss and British central bank announcements in the European session. USD/CHF fell by around 0.5% to the range of 0.9130, while GBP/USD rose by around 0.5% to its highest level since early February.

usdchfUSD/CHF Daily chart via TradingView

Swiss National Bank (SNB) has decided to raise its benchmark interest rate by 50 basis points from 1.00% to 1.50%, in line with consensus expectations. This is the fourth rate hike carried out by SNB to curb Swiss inflation.

The Swiss inflation rate was 3.4% (Year-over-Year) in February 2023. The figure is much higher than the consensus estimates and policymakers' expectations. SNB's latest projection shows that inflation is expected to begin declining in the coming months, but it is still higher than its target.

The inflation projection is an average of 2.6% in 2023, then only drops to 2% in 2024 and 2025. However, SNB has set an inflation target range of 0% to 2%.

SNB also stated that the interest rate could rise further to achieve medium-term inflation targets. They acknowledged the risk of an economic slowdown in a high-interest-rate environment but are confident that the unemployment rate will remain low.

SNB has recently been in the market's spotlight in connection with the crisis surrounding one of Switzerland's largest banks, Credit Suisse. SNB extended loans of up to 50 billion Swiss francs to bail out Credit Suisse, facilitating UBS's acquisition of the multinational bank. However, Credit Suisse's crisis has not affected SNB's interest rate policy.

The latest SNB policy statement disregards the Credit Suisse issue and does not even discuss the risk of instability in the banking sector. The statement only mentions, "The policy announced over the weekend by the federal government, FINMA, and SNB has halted the crisis."