News conference
22 September 2022,
10.00 am
Introductory remarks by Thomas Jordan
Ladies and gentlemen
It is my pleasure to welcome you to the news conference of the Swiss National Bank. Our
news conferences will now be held after every monetary policy assessment. The introductory
remarks will be shorter overall. This will give us more time to take your questions afterwards.
Monetary policy decision
I will begin with our monetary policy decision. We have decided to tighten our monetary
policy further and to raise the SNB policy rate by 0.75 percentage points to 0.5%. In doing so,
we are countering the renewed rise in inflationary pressure and the spread of inflation to
goods and services that have so far been less affected. It cannot be ruled out that further
increases in the SNB policy rate will be necessary to ensure price stability over the medium
term. To provide 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, 23 September 2022. Moreover, we are
adjusting the implementation of our monetary policy to the positive interest rate environment.
This ensures that the secured short-term Swiss franc money market rates remain close to the
SNB policy rate. Banks' sight deposits held at the SNB are remunerated at the SNB policy
rate up to a certain threshold. Sight deposits above this threshold are remunerated at an
interest rate of zero percent. We will also use liquidity-absorbing measures. My colleague
Andréa Maechler will describe the adjustments to monetary policy implementation in more
detail later.
Let me now turn to inflation developments. Inflation rose to 3.5% in August and is likely to
remain at an elevated level for the time being. The latest rise in inflation is principally due to
higher prices for goods, especially energy and food. Our new conditional inflation forecast is
based on the assumption that the SNB policy rate is 0.5% over the entire forecast horizon
(cf. chart 1). Up to mid-2024, the forecast is above that of June. After that, it is lower due to
the now tighter monetary policy. At the end of the forecast horizon, inflation stands at 2%.
The new forecast puts average annual inflation at 3% for 2022, 2.4% for 2023 and 1.7% for
2024 (cf. table 1). Without today's SNB policy rate increase, the inflation forecast would be
significantly higher.
Global economic outlook
I will now move on to the economic outlook. Global economic growth has slowed
considerably in recent months. At the same time, inflation in many countries is markedly
above targets. In response, numerous central banks have further tightened their monetary
policy.
In our baseline scenario, we expect this challenging situation to persist for now. Global
economic growth is thus likely to remain weak in the coming quarters. In particular, the
energy situation in Europe, the loss of purchasing power due to inflation, and tighter financing
conditions are having a dampening effect. Inflation will remain elevated for the time being.
However, the importance of temporary factors such as supply bottlenecks is likely to diminish
over the medium term. The increasingly tighter monetary policy in many countries should
also help inflation gradually return to more moderate levels.
Our scenario for the global economy is subject to significant risks. For example, the energy
situation could worsen again. At the same time, high inflation could become embedded and
require stronger monetary policy responses abroad. Finally, the coronavirus pandemic
continues to pose important downside risks to growth.
Swiss economic outlook
In Switzerland, GDP growth in the second quarter was lower than expected, at 1.1%. This was
mainly due to weaker performance in manufacturing. The short-term outlook has deteriorated.
By contrast, the situation on the labour market has remained positive.
The further development of the economy is likely to be shaped by the economic slowdown
abroad and the availability of energy in Switzerland. To date, the prices of natural gas and
electricity in particular have risen sharply.
For this year, we anticipate GDP growth of around 2%. This is roughly half a percentage
point lower than at the last monetary policy assessment. The level of uncertainty associated
with the forecast remains high. The biggest risks are a global economic downturn, a
worsening of the gas shortage in Europe and a power shortage in Switzerland. 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 explain
today's decision.
Last quarter, our conditional inflation forecast indicated that, without a further tightening of
monetary policy, inflation would be above the range consistent with price stability at the end
of the forecast horizon. This meant that further interest rate increases might be needed to
stabilise inflation in the range consistent with price stability over the medium term. This has
turned out to be the case.
While Switzerland's inflation rate of 3.5% is low by international comparison, it is
significantly above the 0% to 2% range we equate with price stability. There are also growing
signs that higher prices are increasingly spreading to goods and services that are not directly
affected by the war in Ukraine or the consequences of the pandemic. Information from our
delegates for regional economic relations suggests that companies can more easily transfer
higher costs to their sales prices. In addition, energy prices have continued to rise overall and
are increasing inflationary pressure in many sectors. This heightens the risk of second-round
effects. We have therefore concluded that a significant increase in the SNB policy rate is
appropriate. Moreover, our new forecast, which as always takes account of today's decision,
shows that a further tightening of monetary policy cannot be ruled out in the coming quarters.
However, the environment continues to be subject to a high degree of uncertainty.
Let me now say a few words about the exchange rate. The Swiss franc has appreciated in
trade-weighted terms by around 7% since the monetary policy assessment in June. This
appreciation helps to tighten monetary conditions and dampen inflationary pressure. In order
to set appropriate monetary conditions, we remain willing to be active in the foreign exchange
market as necessary. If there were to be an excessive appreciation of the Swiss franc, we
would purchase foreign currency. If the Swiss franc were to weaken, however, we would
consider selling foreign currency.
Period of negative interest rates comes to an end
With today's decision, an extended period of a negative SNB policy rate comes to an end.
Negative interest was introduced at the beginning of 2015 to counter upward pressure on the
Swiss franc associated with the discontinuation of the minimum exchange rate. Over the past
years, negative interest has helped to dampen the appreciation of the Swiss franc and to
ensure price stability.
At the same time, we were always aware that negative interest can have undesirable
sideeffects and presents challenges for many economic agents. On the whole, however, negative
interest has proved its worth. The benefits for monetary policy clearly outweighed the costs of
the side-effects. Without negative interest, price stability could not have been ensured and
economic developments would have been significantly less favourable. Negative interest will
remain an important monetary policy instrument, which we will use if needed.
Ladies and gentlemen, thank you for your attention. I now hand over to Martin Schlegel, who
will speak about the mortgage and real estate markets.