Jean-Pierre Roth: Rising oil prices - a challenge for monetary policy?
Central bank: snb | Type: speech | Date: 2005-11-02

Jean-Pierre Roth: Rising oil prices – a challenge for monetary policy?
Speech by Mr Jea n-Pierre Roth, Ch airman of the Gove rning Board of th e Swi ss National Ba nk,
Déjeuners de la Finance, Geneva, 2 November 2005.
The complete speech can be found in French on the Swiss National Bank’s website ().
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Despite oil p rices being at a hi storically high l evel, inflation h as in creased only sli ghtly in re cent
quarters and growth appears to be robust. Are we t o assume, th erefore, that oil no longe r plays an
important role in today’s economic environment? What challenges does the current situation pose for
monetary policy?
For the first time, the steady rise in energy prices is not the result of a political boycott by oil-producing
countries, bu t of an in crease in e nergy deman d, coming i n p articular from th e ne wly ind ustrialised
countries in Asia. In othe r words, the ri se in crude oil prices this t ime can b e attributed to th e strong
growth in global economic activity.
This does not mean, however, that th e role of monetary policy has changed. Although core inflation
currently appears to be under control i n most countries, a persistent and continuous rise in energy
costs could have a n effe ct on all p rices and wages in the lo ng run, th ereby jeopa rdising moneta ry
stability. Notwithstanding the low level of inflation (excluding energy prices), it is vital that the monetary
authorities maintain a forward-looking stance so as not to put their credibility on the line and to ensure
long-term price stability.