SNB continues to tighten the monetary policy

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The Swiss National Bank SNB continues to raise interest rates. (Image: Gerd Altmann / pixabay)

The Swiss National Bank SNB has once again taken its cue from the U.S. Federal Reserve Fed. It continues to tighten monetary policy in line with the U.S. central bank, but the rationale is somewhat different.

SNB has raised its key interest rate by 0.5 percentage points to now 1.0 percent. This was announced by the central bank on Thursday. With this, Switzerland takes the same step one day later as the U.S. Fed did on Wednesday.

The responsible persons around national bank president Thomas Jordan justified their step in front of the media in Berne with the increased inflation pressure and a further spreading of inflation in Switzerland.

Graduated approach

It was not even ruled out that further interest rate hikes would be necessary to ensure price stability in the medium term, they said.

The new interest rate level will apply from tomorrow, Friday, Jordan added at the media briefing. Above certain limits, banks’ sight deposits will even earn interest at a mere 0.5 percent, he explained.

With this graduated interest rate, the central bank is trying to ensure that short-term secured money market interest rates are close to the SNB key rate.

Inflation from abroad

Current inflation was around 3 percent in November, which is clearly too high. Moreover, the easing on the inflation front in recent months was only due to cheaper oil products, the statement continued.

Inflation is likely to remain elevated for the time being, according to the central bankers’ assessment.

Medienkonferenz der Schweizerischen Nationalbank am Donnerstag in Bern

The Governing Board of the Swiss National Bank around Thomas Jordan answered questions from the media in Bern on Thursday. (Image:

Jordan also explained that the SNB had weakened inflationary pressure from abroad by revaluing the Swiss franc. So this is a different form of approach from the U.S., which is primarily trying to control inflation at home.

CS as a topic

On top of that, Jordan does not expect a recession in the coming year, but rather weaker growth, as he said with regard to the base scenario. But in some parts of the economy this could well mean a downturn.

Jordan does not see the country’s financial stability at risk, with the focus on the major bank Credit Suisse (CS). In principle, the central bank does not comment on individual institutions, but he welcomed the planned transformation of CS.

However, the measures introduced to reduce risk would need time to take effect. In any case, the capital increase at CS had already been successfully completed last week.

Negative equity?

With regard to the lower equity capital, which reported on, Jordan sees no problem because the SNB is not a normal publically limited company.

The losses due to the rise in interest rates would become immediately visible with the market-to-market valuation and would lead to the declines in equity.

However, the SNB would build these up again via the profits that accrue later.

Furthermore, the distribution reserve would have to be filled, over time, before dividend payments would be made, Jordan stipulated.


SNB continues to tighten the monetary policy

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