SNB Is Serious About Inflation

Taking It Seriously

              The Swiss National Bank is taking the rising inflation in Switzerland "seriously", as its chairman Thomas Jordan said on Monday to Swiss broadcaster SRF in an interview. However Jordan believes the issue with inflation is temporary and prices should stabilize soon. "Some of this inflation is certainly temporary. We expect it to come down again," he claimed. "On the other hand, all central banks have to be careful that it doesn't become permanent, and that requires close monitoring of the situation," Jordan added. Indeed rising inflation has recently became a problem around the world, especially in the European Union and US. Some major central banks are considering raising interest rates to fight off inflation. Just last week the U.S. Federal Reserve said it was likely to hike interest rates in March as it also confirmed plans to scrapped its bond purchase programme at the same time. This news came as a surprise to investors. Markets are now preparing for possible as many as four interest rate hikes in the US this year, and heavy impact of those on exchange rates. According to Jordan this was a good sign as it showed the U.S. economy was operating at capacity again, while the FED seems to start the process of normalizing it monetary policy after years of very low interest rates. "It also means that interest rates around the world are going up a little bit and basically that's positive news for us," Jordan said.

Relieving Pressure on CHF Exchange Rate

              Switzerland is still having the record low interest rates in the world as part of its monetary policy aimed at keeping CHF exchange rate from appreciating too much. It does not plan any change soon as inflation is still close to target, and policymakers believe rise of prices is short-termed. But higher interest abroad may put off some pressure from Swiss franc exchange rate, helping the SNB in the fight against too strong price of currency. CHF is considered safe-haven asset by investors who rely on it heavily in times of the pandemic. They buy Swiss francs which caused CHF/EUR hitting the lowest points in almost seven years. The good exchange rate of CHF has dampened Swiss inflation, that is at level of 1.5%, meanwhile in the eurozone it is close to 5%.