Major central banks are taking their latest monetary policy decisions this week amid the collapse of some major banks in the US and Switzerland, fearing its repercussions for the global banking sector.
After the Fed’s meeting on Wednesday, the Swiss National Bank’s (SNB) announcement is set for Thursday 23rd March at 12:30 GMT+4, followed by the Bank of England (BoE) at 16:00 GMT+4.
Swiss annual inflation rose to 3.4% in February, exceeding the SNB's target range of 0-2%. Markets now anticipate more aggressive action from the SNB in its next meeting. An increase of 50 bps in interest rates is expected following the previous 50 bps hike in the central bank’s last December meeting.
Chair of the Swiss National Bank, Thomas Jordan has already hinted at a further rate hike in the SNB’s next meeting, stating that the central bank “cannot rule out that we will have to further tighten monetary policy".
The bank is also pressured by Credit Suisse’s recent liquidity crisis and fears of its spread further across the banking sector. Therefore, to maintain economic stability, the Swiss National Bank provided a substantial liquidity assistance loan of up to CHF 100 billion, based on the Federal Council's Emergency Act.
Per this act, the SNB may give Credit Suisse a loan for liquidity support up to CHF 100 billion backed by a federal default guarantee. The Public Liquidity Backstop (PLB), whose main components were already chosen by the Federal Council in 2022, serves as the foundation for the loan's structure.
The Bank of England also meets on the 23rd of March, expected to lower the pace of interest rate hikes with a projected increase of 25 basis points, bringing the Bank Rate up to 4.25%. This would come following the BoE’s last 50 bps increase, bringing interest rates in the UK to their highest level since the 2008 financial crisis.
The majority of economists surveyed by Reuters this week predicted that the BoE will likely decide to raise interest rates for the 11th consecutive time on Thursday, marking the end of a tightening cycle that started in late 2021. In February, the BoE hinted that it was approaching a halt, expecting inflation to decline further into 2023 with signs of an economic slowdown.
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