The U.S. Federal Reserve (Fed) on Wednesday and the European Central Bank (ECB) seven days earlier opted for rate hikes, and central banks meeting on Thursday should follow suit, say the majority of economists.

In the three European countries concerned, the number one objective of monetary policy remains to achieve inflation at 2%, which is still far from being the case.

But the bankruptcy of California's Silicon Valley Bank (SVB), and then two other US regional banks, has shown how weakened the banking sector has been by the unbridled rate hikes of recent months, making further monetary tightening perilous.

The Fed warned after its meeting that the recent bank crisis was "likely (...) to weigh on economic activity, hiring and inflation", stressing that "the extent of these effects is uncertain".

And the risk is not limited in the United States, as evidenced by the takeover of Credit Suisse by UBS: ECB President Christine Lagarde acknowledged on Wednesday that tensions in the banking sector were creating "new risks" for the economy.

British twists

As for the United Kingdom, the BoE had signaled at its last meeting that after ten consecutive increases, it could keep its rate unchanged, at 4%, if inflation moved in line with expectations.

But since then, the economy has held up better than expected across the Channel, and the Minister of Finance estimated during his presentation of the budget that the country would technically avoid recession, with a simple contraction of the economy of 0.2% in 2023.

The President of the Swiss National Bank (SNB), Thomas Jordan, on January 20, 2023 in Davos © Fabrice COFFRINI / AFP/Archives

And, the latest surprise for the UK market, inflation in the UK, rebounded in February and still exceeds 10%.

As a result, investors are now expecting an increase of 25 basis points, as for the Fed the day before.

Swiss and Norwegian increases

For its part, the Swiss National Bank (SNB), which worked to secure the purchase of Credit Suisse this weekend, should still raise its rate by 50 basis points, like the ECB before it, say economists.

Once again, this is due to inflation, which remains significantly lower than in the rest of Europe, at 3.4% year-on-year in February, but which has accelerated in recent months, while Swiss key rates remain low, at 1%, after years of negative rates.

Cost of living crisis in the UK © Jonathan WALTER / AFP

Earlier this month but before the Credit Suisse crisis, central bank chairman Thomas Jordan told SonntagsBlick that he would do "everything possible" to fight inflation, suggesting that more hikes were in the pipeline.

And in Norway, the central bank left itself little room for maneuver at its meeting in January, when it left rates unchanged at 2.75% but deemed "very likely" a hike in March.

Investors expect it to keep its promises and raise rates to 3%, even though inflation slowed more than expected in February, to 6.3%.

The SNB will publish its decision at 08:30 GMT, the Bank of Norway at 09:00 GMT, and the BoE will close the ball at 12:00 GMT.

© 2023 AFP