News conference
Embargo
21 March 2024, 10.00 am
Introductory remarks by the Governing Board
Thomas Jordan, Martin Schlegel and Antoine Martin
Chairman of the Governing Board / Vice Chairman of the Governing Board / Member of the
Governing Board
Swiss National Bank
Zurich, 21 March 2024
© Swiss National Bank
Ladies and gentlemen
As Chairman of the Governing Board, it is my pleasure to welcome you to the news
conference of the Swiss National Bank. I would also like to welcome all those who are
joining us today online. I extend a special welcome to Antoine Martin. This is his first press
conference as a Member of the Governing Board. After our introductory remarks, we will
take questions from journalists as usual. Questions can also be asked by telephone.
Monetary policy decision
I will begin with our monetary policy decision. We have decided to lower the SNB policy rate
by 0.25 percentage points to 1.5%. The change applies from tomorrow, 22 March 2024.
Banks' sight deposits held at the SNB will be remunerated at the SNB policy rate up to a
certain threshold, and at 1.0% above this threshold. We also remain willing to be active in the
foreign exchange market as necessary.
The easing of our monetary policy has been made possible because the fight against inflation
over the past two and a half years has been effective. For some months now, inflation has
been back below 2% and thus in the range we equate with price stability. According to our
new forecast, inflation is also likely to remain in this range over the next few years.
With our decision, we are taking into account the reduced inflationary pressure as well as the
appreciation of the Swiss franc in real terms over the past year. The policy rate cut also
supports economic activity. Today's easing thus ensures that monetary conditions remain
appropriate.
We will continue to monitor the development of inflation closely. We will adjust our
monetary policy again if necessary to ensure inflation remains within the range consistent
with price stability over the medium term.
Inflation forecast
Allow me to address the development of inflation. Inflation has declined further since the
beginning of the year, and stood at 1.2% in February. This decrease was attributable to lower
goods inflation. Inflation is currently being driven above all by higher prices for domestic
services.
Our new conditional inflation forecast is significantly lower than that of December. In the
short term, this is above all due to the fact that price momentum in the case of some categories
of goods has slowed more quickly than had been expected in December. In the medium term,
lower second-round effects are leading to a downward revision. Over the entire forecast
horizon, the conditional inflation forecast is within the range of price stability (cf. chart). The
forecast puts average annual inflation at 1.4% for 2024, 1.2% for 2025 and 1.1% for 2026
(cf. table). Our forecast is based on the assumption that the SNB policy rate is 1.5% over the
entire forecast horizon.
Let me now turn to the global economic outlook. The global economy grew moderately in the
fourth quarter of 2023. However, developments continued to vary greatly between the
individual economic areas. The US economy again showed robust growth, while activity was
modest in many other countries.
Having declined rapidly in many countries in 2023, inflation has decreased at a somewhat
slower pace in recent months. Inflation in many countries remains above central banks'
targets. Against this background, many central banks have left their restrictive monetary
policy unchanged for the time being.
Global economic growth is likely to remain moderate in the coming quarters, in particular due
to the tightening of monetary policy in the last two years and less expansionary fiscal policy.
Inflation is likely to decline further, not least due to the restrictive monetary policy.
Our scenario for the global economy is still subject to significant risks. Inflation could remain
elevated for longer in some countries, necessitating a tighter monetary policy there than
expected in our baseline scenario. Equally, geopolitical tensions could increase. It therefore
cannot be ruled out that global economic activity will be weaker than assumed.
Swiss economic outlook
How does the economic situation look in Switzerland? GDP growth was moderate in the
fourth quarter of last year. The services sector expanded again, while value added in
manufacturing stagnated. This was above all attributable to the subdued momentum in the
manufacturing sector globally, but especially in Germany. Unemployment rose somewhat
further, and the utilisation of overall production capacity was normal.
Growth is likely to remain modest in the coming quarters. The weak demand from abroad and
the appreciation of the Swiss franc in real terms over the past year are having a dampening
effect. Overall, Switzerland's GDP is likely to grow by around 1% this year. In this
environment, unemployment is likely to continue to rise gradually, and the utilisation of
production capacity is likely to decline somewhat further.
Our forecast for Switzerland, as for the global economy, is subject to significant uncertainty.
The main risk is weaker economic activity abroad.
Monetary policy outlook
Ladies and gentlemen, allow me to return to our monetary policy.
Following the coronavirus pandemic, inflation rose strongly worldwide. In many countries,
the increase in inflation proved to be more persistent than at first assumed. The SNB began
tightening its monetary policy at an early stage. We initially allowed the Swiss franc to
appreciate and then from June 2022 onwards raised the SNB policy rate by a total of
2.5 percentage points. In addition to this, we sold foreign exchange.
Tightening monetary conditions in this way had various advantages. First, the appreciation of
the Swiss franc significantly weakened the transmission of inflation from abroad. The
increase in inflation in Switzerland was therefore considerably smaller than in other countries.
Second, we had to raise our policy rate only moderately by international comparison. This
also prevented a stronger rise in the mortgage reference interest rate.
The tightening of our monetary policy led to inflation being above 2% only for a short time,
and rapidly decreased from its peak of 3.5% in August 2022 to the current level of 1.2%.
Inflation expectations remained well anchored throughout this period. Overall, the
secondround effects were limited. Over the past three months, the underlying inflationary pressure
has decreased further. This is reflected in our conditional inflation forecast, which we have
revised down significantly compared with December. It is within the range of price stability
over the entire forecast horizon.
Having already decided in December to no longer focus on sales of foreign exchange, we can
now lower the SNB policy rate by 0.25 percentage points to 1.5%. Our decision takes into
account the significantly reduced inflationary pressure as well as the appreciation of the Swiss
franc in real terms over the past year. It also supports economic activity. With today's easing,
we are ensuring that monetary conditions remain appropriate.
However, in the current environment uncertainty is still elevated. We will therefore monitor
the ongoing development of inflation closely. If necessary we will adjust our monetary policy
again. We also remain willing to be active in the foreign exchange market as necessary. Our
goal remains to keep inflation within the range consistent with price stability on a sustainable
basis over the medium term.
Ladies and gentlemen, thank you for your attention. I will now hand over to Martin Schlegel.
Lessons from the crisis at Credit Suisse
It is now around one year since the crisis at Credit Suisse came to a head. On 19 March 2023,
the authorities announced a broad package of measures. It comprised the acquisition of Credit
Suisse by UBS and state support measures. The SNB provided a total of up to CHF 168
billion in liquidity assistance loans. In its capacity as lender of last resort, it thus made a
substantial contribution towards stabilising the financial system.
Over the past year, the SNB has analysed the crisis in depth and identified lessons to be
learnt. We have explained our findings in detail in the accountability report just published. I
would like to briefly present to you here the key lessons from the SNB's perspective.
The crisis at Credit Suisse highlighted a need for adjustments to the regulation of systemically
important banks. The goal must be to make the financial system more resilient. I would like to
focus on three elements. First, banks' liquidity provisions should be improved. Liquidity
requirements should take appropriate account of the liquidity needs observed during the crisis.
At the same time, banks should be required to prepare significantly more collateral to be used
for obtaining liquidity assistance from the SNB and from foreign central banks. This
preparation is absolutely essential to ensure that the collateral can actually be used if the need
arises. Second, options for the stabilisation of a systemically important bank at an early stage
should be expanded. Any decision to take such action could also consider market-based and
forward-looking indicators in addition to the regulatory metrics. Third, banks' equity should
be structured in a way that losses can be better absorbed. The objective must be a more robust
valuation of assets that are included in regulatory capital as well as a more solid regulatory
treatment of participations.
The measures I have outlined are aimed at making the financial system more resilient. The
SNB is actively involved in ongoing work to adjust the regulations, at both national and
international level.
Ladies and gentlemen, thank you for your attention. I will now hand over to Antoine Martin.
Developments on the financial markets and implementation of monetary policy
Before discussing the implementation of monetary policy, I would like briefly to review the
main developments on the global financial markets. Since the last monetary policy
assessment, interest rates have increased worldwide on the back of robust economic data and
a slower-than-expected decrease in inflation in the US. Improving expectations regarding
economic conditions and solid Q4 2023 corporate earnings in the US supported risk assets.
Various US equity indices traded at all-time highs and credit spreads tightened further.
In Switzerland, on the other hand, interest rates have fallen slightly. The resulting widening of
interest rate differentials has been weakening the Swiss franc since the beginning of 2024.
The Swiss franc has depreciated by around 1% on a trade-weighted basis since the last
monetary policy assessment, having appreciated temporarily at year-end. The Swiss franc is
approximately 5% higher relative to the beginning of 2023.
Let me now give you a brief overview of our monetary policy implementation, specifically in
the money market. We can see that this continues to prove its worth. In an environment with
high excess liquidity, the remuneration of sight deposits and the liquidity-absorbing open
market operations ensure that the secured short-term Swiss franc money market rates remain
close to the SNB policy rate. In addition, tiered remuneration creates an incentive for liquidity
redistribution in the money market and thus also contributes to a solid calculation basis for
SARON.
The SNB regularly reviews the implementation of its monetary policy and adjusts it as
necessary. Its main goal is always the effective steering of secured short-term Swiss franc
money market rates. Furthermore, we aim to keep the costs of implementing our monetary
policy low. To this end, since 1 December 2023 we no longer remunerate sight deposits held
by banks to meet the minimum reserve requirement. This adjustment has no effect on money
market rates.