European central banks are making efforts to curb inflation, in conjunction with the US Federal Reserve’s announcement of raising interest rates by 0.25 percentage points.
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The Bank of England took a similar decision, bringing the main interest rate to 4.25%.
Switzerland, Norway and Britain announced today, Thursday, that they will raise interest rates to curb inflation, despite the turmoil in the global banking sector, a day after the US Federal Reserve raised the cost of lending.
After the Federal Reserve raised the interest rate by 25 basis points, the Bank of England took a similar decision, bringing the main interest rate to 4.25%, which is its highest level since the global financial crisis of 2008.
The SNB, which was involved in the USB takeover of Credit Suisse, raised the key interest rate, as expected, by half a percentage point to 1.5 percent.
The Norwegian Central Bank followed suit, announcing a quarter-percentage-point hike to 3 percent.
Central banks are still struggling to rein in inflation with the US Federal Reserve announcing a 0.25 basis point rate hike on Wednesday, a week after the European Central Bank announced a massive 50 basis point increase in borrowing costs in the eurozone.
Also read: A British bank buys the “Silicon Valley” bank branch in the United Kingdom for a symbolic amount
The need to “curb inflation”
After meetings of their monetary policy officials, the Swiss Central Bank announced in a statement that it was “addressing the new rise in inflationary pressures,” while the Bank of Norway stressed “the need for a higher key interest to curb inflation.”
While the Federal Reserve raised the interest rate, analysts said that the statement that accompanied the decision indicates that the bank may soon suspend monetary tightening measures.
After an earlier warning by the US Reserve that “additional increases … may be appropriate” to curb inflation, he said that “additional tightening measures may be appropriate.”
The Fed said that recent developments in the banking sector “are likely to weigh on economic activity, employment and inflation.”
The SNB’s rate decision followed the latest hike in December. It comes days after Switzerland contributed at the end of last week to concluding the acquisition of USB Bank of its troubled rival, Credit Suisse.
End the crisis
The Swiss central bank said that the Swiss authorities “put an end to the crisis” at Credit Suisse, stressing that its measures maintained financial stability.
Bank President Thomas Jordan announced at a press conference in Zurich that any failure to resolve the Credit Suisse crisis “would have caused a greater financial crisis, not only in Switzerland, but most likely, globally.”
The acquisition of the bank came after the collapse of the Silicon Valley and Signature Bank in the United States, which caused turmoil in global markets.
What contributed to the collapse of Silicon Valley was the Federal Reserve’s decision to raise interest rates, which were close to zero, to high rates.
This prompted economists to finally talk about the possibility of central banks suspending measures to stop raising interest rates.
But severe inflation remains a major problem and is widely seen as threatening a global recession this year.
And at the beginning of the week, there was talk about how the Bank of England could decide against raising the main interest rate of 4 percent.
However, official data showed, on Wednesday, a sudden rise in annual inflation in the United Kingdom, which amounted to 10.4 percent, which changed the course of that talk.
The Bank of England said today, Thursday, that “uncertainty around the financial and economic outlook has risen.”
