In the world of central banks, the Swiss National Bank (SNB) is one of the few institutions in a comfortable position. Maybe it’s only temporary. And relative. Nevertheless: in the space of three months, it was finally able to emerge from the era of negative rates. A tool which has borne fruit and which definitely enters its arsenal, underlined Thursday Thomas Jordan. But that had its share of controversies and collateral problems. The president of the institution will not hesitate to reuse it if necessary. By its own admission, however, living in a positive interest rate environment is much better. This is now the case with interest rates falling to 0.5% for the first time in more than a decade.
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The SNB’s situation is also enviable because inflation remains modest by international comparison. At 3.4%, it exceeds its target (between 0 and 2%), of course. It’s unpleasant and it involves risks, but less than in its neighbors. The SNB can point this out: this increase is mainly due to soaring energy and food prices, against which it cannot do much. It’s the same logic in Europe, but the SNB has two advantages that the ECB does not have: the energy component is less important in the total inflation Switzerland and the strong franc also limit this increase said to be imported since it comes from foreign products.
It can therefore venture to say that additional rate hikes could be justified. They are not imposed, as in Europe or the United States. This room for maneuver is unexpected in the face of softening economic growth and increasing risks: economic consequences of the war in Ukraine, energy shortages, remnants of the pandemic, etc. And now, the combativeness of central banks competing for rate hikes. Late and under pressure, the American Federal Reserve (Fed) embodies the peril of the moment: to fight against inflation which has become widespread, it takes the risk of going too far and causing a recession. However, those who are now suffering from inflation will also be those who will suffer from the economic downturn.
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The SNB has the triple luxury of not being far behind in its fight against inflation which is not generalized, of counting on a strong franc which this time turns out to be a serious asset, and of relying on a relatively strong economy. She can still serenely see it coming. Even if the Swiss economy is never watertight: it will also suffer the consequences of an American or European recession.
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