contents
Many Western central banks are currently walking a tightrope: On the one hand, there is the economy, which is still recovering from the consequences of the corona pandemic and is already being weakened again by the war and the sanctions. And then there’s inflation, which has been rising rapidly, reaching worrying levels.
What should I do? According to the textbook, central banks have to raise interest rates if they want to combat inflation. But a rate hike is an additional burden on the economy. Rate hikes could completely thwart a recovery that has already stalled because of the war – and even plunge the economy into a recession.
The ECB is having the hardest time
In this consideration, the US Federal Reserve decided that it is currently more important to fight inflation than to support the economy. And the European Central Bank (ECB) also seems to be rethinking: According to reports, it could now raise interest rates as early as July.
For the Europeans, however, the tightrope walk is more tricky than for the Americans: the inflation rates are similarly high (most recently 8.5 percent in the USA compared to 7.5 percent in the euro zone).
But the economy is not doing so well in Europe. The recovery from the corona pandemic is faltering, and the consequences of war and sanctions are more noticeable in Europe than in the USA. The danger of pushing the economy into recession with interest rate hikes is greater in Europe.
Waiting is no longer an option
With inflation rates that high, however, the central banks have to take countermeasures, otherwise inflation could get completely out of control. The consequences are painful, not least for people with a small household budget: if purchasing power dwindles so much, they quickly find themselves in existential difficulties.
If the ECB does increase its interest rates in July, the Swiss National Bank (SNB) could follow suit: it could herald the end of the unwelcome negative interest rates.
The SNB is in a simpler situation than the ECB: Inflation in Switzerland is significantly lower (most recently 2.4 percent) than in the euro area, and the economy is currently more robust, not least thanks to the pharmaceutical sector.