News conference
Berne, 16 June 2022
Thomas Jordan
Introductory remarks by Thomas Jordan
Ladies and gentlemen
It is my pleasure to welcome you to the Swiss National Bank's news conference. In my
remarks, I will begin by explaining our monetary policy decision and our assessment of the
economic situation. After that, Fritz Zurbrügg will present the key messages from this year's
Financial Stability Report. Andréa Maechler will then comment on the situation on the
financial markets and the implementation of monetary policy. We will - as ever - be pleased
to take your questions afterwards.
Monetary policy decision
I will begin with our monetary policy decision. We have decided to tighten our monetary
policy and to raise the SNB policy rate and the interest rate on sight deposits at the SNB by
half a percentage point to -0.25%. In doing so, we are seeking to counter increased
inflationary pressure. The tighter monetary policy is aimed at preventing inflation from
spreading more broadly to goods and services in Switzerland. It cannot be ruled out that
further increases in the SNB policy rate will be necessary in the foreseeable future to stabilise
inflation in the range consistent with price stability over the medium term. To ensure
appropriate monetary conditions, we are also willing to be active in the foreign exchange
market as necessary.
The SNB policy rate change applies from tomorrow, 17 June 2022. With effect from 1 July
2022, we are also adjusting the threshold factor used to calculate the level of banks' sight
deposits at the SNB exempt from negative interest. The factor will be lowered from 30 to 28.
This will ensure that the secured short-term Swiss franc money market rates are close to the
SNB policy rate.
Inflation forecast
Inflation reached 2.9% in May and is likely to remain at an elevated level for the time being.
The main reason for the higher inflation is the increase in the prices of oil products, food and
goods affected by the global supply bottlenecks. However, there has also been a rise in
inflation for some other goods and services.
The SNB's new conditional inflation forecast is based on the assumption that the SNB policy
rate is -0.25% over the entire forecast horizon. The new forecast for the next three years is
above that of March (cf. chart 1), and stands at 2.8% for 2022, 1.9% for 2023, and 1.6% for
2024 (cf. table 1). Without today's SNB policy rate increase, the inflation forecast would be
significantly higher.
Global economic outlook
Let me turn to the economic outlook worldwide. Global economic growth has slowed
markedly recently.
This slowdown is on the one hand attributable to the high level of inflation, which is weighing
on purchasing power and thus reducing demand. On the other hand, the uncertainty stemming
from the war in Ukraine as well as the coronavirus lockdowns in China are curbing the
development of the global economy. That said, unemployment has continued to decline in
many countries. In the advanced economies, it is now back around the low levels seen prior to
the pandemic.
Since March, there has been a further considerable and broad-based increase in inflation in
many countries. The war in Ukraine has been a significant factor here, too, in that the prices
of many commodities have risen as a result. In addition, persisting supply bottlenecks have
led to further price increases for various goods.
In our baseline scenario for the global economy, we assume that energy prices will remain
high for the time being, but that there will not be an acute energy shortage in the major
economic areas. The positive development of the economy should thus continue overall.
Owing to the increased prices for energy and food, coupled with the supply bottlenecks,
inflation is likely to remain high for some time. However, the importance of these factors
should diminish over the medium term. With monetary policy also becoming increasingly
tighter in many countries, inflation is likely to gradually return to more moderate levels.
Our scenario for the global economy is subject to significant risks. For example, inflation
could rise further and thus weigh even more heavily on real incomes and consumer demand.
At the same time, high inflation could become entrenched as a result of increased
secondround effects, requiring stronger monetary policy responses in other countries. Finally, there
are still important downside risks to growth from the war in Ukraine and the pandemic.
Swiss economic outlook
I now come to developments here in Switzerland. The Swiss economy has continued the
favourable development it has shown since the beginning of the year. After modest growth in
the fourth quarter of 2021, GDP increased by just under 2% in the first quarter of this year.
The signals remain positive for the current quarter. The situation on the labour market has
also continued to improve.
The war in Ukraine has thus far had comparatively little adverse impact on economic activity
in Switzerland. The effect has been most clearly felt in the higher energy prices and in the
supply bottlenecks.
For 2022, we still anticipate GDP growth of around 2.5%. Unemployment is likely to remain
low. This favourable forecast is based, among other things, on the assumption that the global
economy continues to grow and that the war in Ukraine does not escalate further.
Our forecast for Switzerland, as for the global economy, is subject to large risks. If the energy
supply in Europe were to be adversely affected, this could have a serious impact on the Swiss
economy. The global supply bottlenecks and further increases in commodity prices could also
slow growth. Furthermore, a resurgence of the coronavirus pandemic cannot be ruled out.
Monetary policy tightening
Ladies and gentlemen, allow me to return to our monetary policy. I would like to set out the
rationale behind the monetary policy move we have made today. My colleague Andréa
Maechler will discuss the adjustment of the threshold factor later.
We have decided to raise the SNB policy rate by half a percentage point because there are
now signs of inflation also spreading to goods and services that are not directly affected by
the war in Ukraine and the consequences of the pandemic. In the current environment, price
increases are being passed on more quickly - and are also being more readily accepted - than
was the case until recently. There is the threat of second-round effects becoming entrenched if
inflation remains above 2% for a longer period. By raising the SNB policy rate today, we aim
to counter the increased inflationary pressure.
Since the last monetary policy assessment, the development of the Swiss franc exchange rate
has also contributed to the rise in inflation. The Swiss franc has depreciated in trade-weighted
terms, despite the higher inflation abroad. Thus the inflation imported from abroad into
Switzerland has increased. Another consequence of this depreciation coupled with
significantly higher inflation abroad is that the Swiss franc is no longer highly valued.
What is the outlook for our monetary policy going forward? The higher SNB policy rate
should via its impact on borrowing costs and the exchange rate contribute to curbing the
development of inflation in Switzerland. From today's perspective, and assuming that the
SNB policy rate remains constant at -0.25%, our new inflation forecast shows the rate of
inflation temporarily declining to around 1.5% before rising back to 2% over time. Without
today's SNB policy rate increase, inflation would be clearly above the range consistent with
price stability at the end of the forecast horizon.
The new inflation forecast shows that further increases in the SNB policy rate may be
necessary in the foreseeable future to stabilise inflation in the range consistent with price
stability over the medium term. The current environment is subject to great uncertainty, also
with regard to exchange rate developments. If there were to be an excessive appreciation of
the Swiss franc, we would be prepared to purchase foreign currency. If the Swiss franc were
to weaken, however, we would also consider selling foreign currency.
We will be observing the developments closely and are prepared to take the necessary
measures in every situation to ensure price stability in Switzerland over the medium term.
Ladies and gentlemen, thank you for your attention. It is now my pleasure to give the floor to
Fritz Zurbrügg.
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