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SNB raises inflation expectations, following the Fed and the ECB

17 Jun 2021 03:23 PM

The Swiss National Bank maintained its expansionary monetary policy with the aim of ensuring price stability and providing continued support to the Swiss economy in its recovery from the impact of the Corona virus pandemic, and the Swiss National Bank indicated that expected high inflation is not a reason to change course a day after the Federal Reserve hinted at raising interest rates, and the National Bank followed Swiss European Central Bank and US Federal Reserve to raise inflation expectations.

However, as it kept the interest rate the lowest in the world at -0.75%, the SNB also said that it was still ready to intervene to weaken the highly valued Swiss Franc and predicted that the Swiss economy would recover faster than expected this year from the effects of the coronavirus.

The US Federal Reserve signaled on Wednesday that broad policy changes could happen sooner than expected when officials moved the first expected interest rate hikes from 2024 to 2023.

Thomas Jordan, the head of the Swiss National Bank, said the SNB's forecast of 0.4% Swiss inflation for 2021 - up from 0.2% previously - and rising to 0.6% in both 2022 and 2023 does not justify a change of course.

Inflation would have to rise substantially more - above the SNB's target range of 0 to 2% - before it would look to hike rates. "We still have a highly valued Swiss franc that is holding down inflation, that is a big difference with many other countries," Jordan added.

The Swiss National Bank said it is more confident about the outlook for the Swiss economy as it recovers from the coronavirus pandemic. It now expects GDP to grow 3.5% this year, up from previous forecasts of a 2.5% to 3% growth rate.

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