The Swiss National Bank (SNB) has decided to raise the key interest rate by a further 0.5 percentage points to 1.5 percent. In doing so, she provides the answer to the inflation question that the world would no doubt have expected from her two weeks ago.
However, after the renewed rate hike, a new question arises: SNB President Thomas Jordan justifies the increase in key interest rates by saying that inflation has continued to rise in Switzerland and is still higher than the SNB accepts. If we weren’t currently in a global banking crisis, the decision would hardly be controversial.
What did the SNB know and what not?
Under the current circumstances, however, the question arises as to whether the National Bank is not further fueling the uncertainty in the banking market with the rate hike. The financial markets themselves will provide the answer to this question. Jordan hopes that the effect will remain negligible given the comparatively low interest rates in Switzerland. He hopes that things will calm down after UBS took over Credit Suisse.
At the same time, a number of questions remain unanswered about this historic bailout, in which the National Bank played a central role. Questions, some of which the National Bank does not want to answer, others probably cannot answer. The National Bank does not want to communicate what it knew when about the plans to take over CS.
No white knight in sight in the worst case
The President of the National Bank, Jordan, dismisses the suspicion that foreign pressure, particularly from the USA, influenced the Swiss decision. He does not accept the criticism that the SNB made liquidity available too late to slow down the loss of confidence in Credit Suisse, nor the criticism that other solutions – such as a partial nationalization of Credit Suisse – would have been possible. There will be no clear answers to these questions afterwards.
But the questions remain. Nobody can rule out that one day the last remaining and now even bigger Swiss bank, UBS, will start to falter. A white knight who could then be pressured into taking over would no longer be available domestically.
The President of the National Bank concedes that the question is justified. The authorities should now think about this. Until decisions are made, there is only hope on this issue as well. The hope that things will go well for as long as possible. Until the next unforeseeable emergency.