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Swiss National Bank will not hesitate to tighten monetary policy – Maechler
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ZURICH (Reuters) -The Swiss National Bank will tighten monetary policy if inflation in Switzerland remains persistently high, governing board member Andrea Maechler said in an interview published on Monday.
ZURICH (Reuters) -The Swiss National Bank will tighten monetary policy if inflation in Switzerland remains persistently high, governing board member Andrea Maechler said in an interview published on Monday.
The European Central Bank on Monday became the latest institution to signal it was hiking rates to combat soaring inflation, following similar moves by the U.S. Federal Reserve and the Bank of England.
The SNB could follow suit, should Swiss inflation remain outside its target range 0-2%. April saw the highest inflation rate in Switzerland for 14 years, with prices rising by 2.5%.
“If the inflation we expect does not come down in the medium term to a range between 0% and 2%, we will not hesitate to tighten policy,” Maechler told Swiss newspaper Bilan.
The SNB now has the world’s lowest interest rate of minus 0.75% which along with its readiness to intervene in the currency markets has been the basis of its monetary policy over the last seven years.
The SNB’s response to higher inflation “will depend on both inflation dynamics and the economic outlook in Switzerland and abroad”, Maechler said.
“We have always said, as soon as we will be able to lift the negative interest rate, we will. We do not know however when we will be able to do so.”
Maechler declined to say whether the SNB would follow any interest rate hike by the ECB in July.
“Our goal is to conduct a monetary policy that is appropriate for the Swiss economy to ensure price stability in the medium term,” she told the newspaper.
Maechler said the SNB did not have a target value for the Swiss franc exchange rate, while higher inflation abroad meant a nominally stronger franc could be tolerated without damaging the economy.
(Reporting by John Revill, editing by Silke Koltrowitz and Michael Shields)
Monetary policy refers to the actions taken by a central bank to manage the money supply and interest rates to achieve macroeconomic objectives such as controlling inflation and stabilizing the currency.
Inflation is the rate at which the general level of prices for goods and services rises, eroding purchasing power. It is typically measured by the Consumer Price Index (CPI).
A central bank is a national institution that manages a country's currency, money supply, and interest rates. It oversees the banking system and implements monetary policy.
Interest rates are the cost of borrowing money or the return on savings, expressed as a percentage. They are influenced by central bank policies and economic conditions.
Financial stability refers to a condition where the financial system operates effectively, with institutions able to withstand shocks and continue to provide essential services.
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