The Swiss National Bank (SNB) lined up on Thursday in the camp of central banks which continue to raise their interest rates, its priority remaining to fight against inflation likely to be more persistent than expected, according to it.
On Thursday, the Swiss central bank raised its key rate by 25 basis points to 1.75%, thus proceeding with its fifth turn of the screw in the space of a year, while leaving the door open for other futures. rate hikes.
It thus follows in the footsteps of the European Central Bank (ECB), which continued to fight against inflation by raising its rate by a quarter of a point last week.
While the major central banks had raised their rates almost in unison, their monetary policies have recently taken different directions.
The US Federal Reserve preferred to take a break after ten successive increases in its rates, while the central bank of China, on the contrary, reduced its short-term rate, then lowered the rate for its one-year loans to financial institutions in order to revive its economy.
In Switzerland, inflation rose sharply in January and February to rise to 3.4%, but then began to fall from March to fall back to 2.2% in May.
It has thus gradually approached the central bank’s 2% target. But this decline is mainly due to the fall in the prices of petroleum products and natural gas, the SNB citing in a press release persistent second-round effects.
Medium term pressure
It lowered its inflation forecast for 2023 to 2.2% (from 2.6% previously) but raised it for 2024 to 2.2% (from 2% previously) and 2.1% for 2025 (2% previously). ) due to an increase in the price of electricity and rents as well as inflationary pressure from abroad which is lasting longer than expected.
While price increases have slowed significantly in recent months, inflationary pressure has increased again in the medium term. In many countries, it remains well above the values targeted by central banks, adds the SNB.
During the press conference, Thomas Jordan, its president, acknowledged that inflation in Switzerland is much lower than elsewhere. Nevertheless it is above our target, he insists, explaining that it is important for the good function of the economy to bring it back below the 2% threshold.
Some economists believe that the ebb of inflation in Switzerland is only temporary given a wave of rent increases expected for the fall.
In Switzerland, rents have been governed since 2008 by a reference rate which limits the increases that may be imposed during the lease. Since that date, it had constantly fallen given the many years of ultra-accommodative monetary policy conducted by the SNB since the 2008 financial crisis in a context of low inflation.
But with the rate hikes over the past year, this benchmark rate rose in June for the first time in its history.
Last week, the economic research center of the Swiss Federal Institute of Technology in Zurich warned that inflation in 2024 could be caused for about half by rent increases.
In his speech, Mr. Jordan acknowledged that the tightening of rates will drive up some rents. But that should not prevent us from raising our key rate, he said, because without a tightening, inflation could persist, making much larger rate hikes inevitable later, considers. -he.
The SNB maintained its 2023 growth forecast of 1%, saying it expects modest growth given weak external demand, losses in purchasing power due to inflation and tighter financing conditions.