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The Credit Suisse headquarters in Zurich, Switzerland, on March 20.FABRICE COFFRINI/AFP/Getty Images

The Swiss central bank hiked its key interest rate Thursday and insisted that a government-orchestrated takeover of troubled Credit Suisse by rival bank UBS ended the financial turmoil.

In a statement, the Swiss National Bank said it is providing large amounts of support for the deal to merge Switzerland’s biggest banks and that the late Sunday announcement by the federal government, financial regulators and the central bank “put a halt to the crisis.”

“An insolvency of Credit Suisse would have had severe consequences for national and international financial stability and for the Swiss economy,” said Thomas Jordan, chairman of the Swiss central bank’s governing board. “Taking this risk would have been irresponsible.”

The hastily arranged, $3.25-billion deal aimed to stem the upheaval in the global financial system after the collapse of two U.S. banks and jitters about long-running troubles at Credit Suisse CS-N led shares of Switzerland’s second-largest bank to tank and customers to pull out their money.

Swiss authorities urged UBS UBS-N to take over its smaller rival after the central bank’s plan for Credit Suisse to borrow up to 50 billion francs ($54-billion) last week failed to reassure investors and customers.

“The extensive liquidity assistance provided the time needed to find a solution to safeguard financial stability,” the central bank said in a statement. “This solution had to be worked out under considerable time pressure in order to be ready before the Asian markets opened this week.”

To support the deal announced late Sunday, the Swiss central bank has said it is providing a loan of up to 100 billion francs ($109-billion) and that the government is providing another 100 billion francs of support as a backstop if needed.

Jordan said the loans are “not gifts” but are backed by collateral and subject to interest.

The central bank hiked its key interest rate by half a percentage point to counter inflation that has risen since the beginning of the year, to 3.4 per cent last month.

It said that was “above the range the SNB equates with price stability” and that economic growth is expected to be modest this year, forecasting a 1 per cent increase in gross domestic product. The SNB said the global economic outlook was uncertain, with the main risks being an economic downturn and adverse effects of the turmoil in the global financial sector.

It comes as central banks around the world are pressing ahead with their fight against inflation even as banking sector chaos has created a global crisis of confidence in the financial system.

The U.S. Federal Reserve went ahead with a quarter-point rate hike Wednesday, and the Bank of England is expected to approve a rise Thursday after inflation unexpectedly grew last month. The European Central Bank raised rates by a half-point last week.

The ECB and Fed chiefs both voiced assurances that the financial system is resilient and money is safe in banks.