constant at −0. 25 %, the rate of inflation will temporarily decline before rising back to 2 % over time. had we not raised our policy rate in june, inflation would very probably have been well above this level over the medium term, and thus persistently outside the range of price stability. our monetary policy decision in june must also be seen as a weighing - up of various risks. tightening too soon or too strongly could have stalled economic development, and possibly even led to renewed deflationary risks. in switzerland ’ s case, however, these factors were clearly outweighed by the risks of tightening too late. waiting could have necessitated a more abrupt and stronger rate increase at a later date, with the risk of a more severe economic downturn and threats to financial stability. the snb ’ s experience in the late 1980s and early 1990s, the most recent phase of higher inflation in switzerland, shows that it can become necessary to pursue a markedly restrictive monetary policy with serious consequences for the real economy once inflation exceeds a certain level. our substantial change in course at a comparatively early stage regarding the development of inflation, and the fact that we envisaged possible further tightening in the near future, were thus aimed at ensuring price stability over the medium term without placing an excessively heavy burden on the economy. this weighing up of various risks takes place in an environment marked by exceptional uncertainty. what does this uncertainty mean for the snb? in the immediate term, the uncertainty above all pertains to the interpretation of the data currently available. in making our monetary policy decisions, it is important that we distinguish between temporary and sustained inflationary pressure. the recent rise in inflation may well have been triggered to a large extent by supply shocks with a temporary impact. however, given the difficulty in identifying an increase in sustained inflationary pressure in the current environment, there is the risk of underestimating the persistence of inflation. this is particularly the case because it is still very difficult to assess the impact of the highly expansionary monetary and fiscal policies worldwide in the wake of the pandemic and the war in ukraine. the uncertainty is also reflected in the fact that our economic models may be capturing the current situation less reliably than usual. we have in fact had to repeatedly make upward revisions to our inflation forecast in recent quarters ( cf. chart 6 ). models are inherently unable to anticipate either shocks – such as in the case of energy prices – or fundamental shifts in the behaviour of economic

the population as a result of immigration made a positive contribution to growth as well. furthermore, during the pandemic in particular, there was also a rapid and targeted fiscal policy response. ii. new constraints the pandemic and the war in ukraine have fundamentally changed the constraints on central banks. in particular, inflation has risen strongly in many countries over the past year, and uncertainty has also increased markedly in many respects. the snb, too, is at present confronted with an inflation rate that is significantly above the range we equate with price stability. as in recent years, inflation in switzerland is currently lower than in many other countries. besides the strong swiss franc, the energy mix in switzerland has thus far also helped to keep inflation comparatively low. nevertheless, the current level of 3. 4 % is still the highest inflation our country has seen since the 1990s. furthermore, there are signs that inflation is increasingly spreading to goods and services that are not directly affected by the pandemic or the war in ukraine. in fact, it appears that in the current environment, higher prices are being passed on more quickly – and are also being more readily accepted – than was the case until just recently. in conjunction with this, longerterm inflation expectations have also been moving upwards slightly over the past quarters. furthermore, there are clear indications of wage growth gathering momentum. how is the snb handling this situation? we already made our initial response to the impending inflationary pressure in the final months of 2021. both inflation and our inflation forecast at that time were still at a very low level. at our monetary policy assessment in december, we announced that we would allow the swiss franc to appreciate to a certain extent in nominal terms in order to reduce the inflationary pressure from abroad. the swiss franc gained around 4 % in nominal terms between autumn 2021 and spring 2022, making imports cheaper and so countering the general increase in prices. in june 2022, we then raised page 4 / 16 the snb policy rate for the first time in 15 years, by half a percentage point to −0. 25 %. at the same time, we signalled that further interest rate moves may be necessary in the foreseeable future. with our policy rate rise, the swiss franc appreciated further. the need for monetary policy tightening is shown by our conditional inflation forecast of june 2022 ( cf. chart 5 ). according to this forecast, and assuming that the snb policy rate remains