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Switzerland’s central bank unexpectedly left its key interest rate unchanged, saying past hikes were countering inflation while warning that more increases may still be needed. bulletin news
The Swiss National Bank (SNB) kept the rate at 1.75 percent but warned that “it cannot be ruled out that a further tightening of monetary policy may become necessary to ensure price stability over the medium term.”
“The SNB will therefore monitor the development of inflation closely in the coming months,” it said.
It also reiterated its readiness to “be active in the foreign exchange market as necessary” to “provide appropriate monetary conditions”.
The bank’s decision to hit pause on a cycle of monetary tightening, following five consecutive rate hikes over the past year, was a bit of a surprise.
Most analysts had expected it to hike the rate by an additional quarter point, to avoid allowing too great a gap with the European Central Bank rate.
But few had ruled out that the SNB might decide to leave its rate unchanged, after Swiss economic activity stagnated in the second quarter.
Inflation has also dipped below the two-percent mark in Switzerland since June, and last month it fell to 1.6 percent on an annual basis, in line with the central bank’s objective.
The SNB left its inflation outlook unchanged at 2.2 percent for 2023 and 2024, and lowered it for 2025 to 1.9 percent down from its forecast of 2.1 percent in June.
“It is thus just within the range of price stability at the end of the forecast horizon,” the bank said.
It said it expected growth to remain weak for the rest of this year, maintaining its outlook that GDP would swell by around one percent.
“Subdued demand from abroad, the loss of purchasing power due to inflation, and more restrictive financing conditions are having a dampening effect,” it said.
The Swiss decision came after the US Federal Reserve on Wednesday also held interest rates steady, although it said another hike is likely in 2023, with fewer cuts than anticipated in 2024.
The Norwegian and Swedish central banks hiked their own rates on Thursday while warning that more tightening was likely in the future.
The Bank of England will announce later Thursday whether it will hike its rate again or hit pause after a surprise dip in inflation in August.
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Notes from APS Radio News
Reportedly because of what was being called a “pandemic”, a number of the world’s central banks embarked on massive programs of monetary expansion, starting in late February and early March of 2020.
For its part, between the early part of March of 2020 to over a year later, the US Federal Reserve added over $4 trillion to its holdings, by purchasing billions of dollars’ worth of Treasury bonds and corporate bonds each month during that period.
As well, at that time it kept interest rates rather low.
Other central banks, including the Bank of Japan and the European Central Bank, followed similar policies.
In addition, during that period many countries engaged in lockdowns; many small and medium-sized businesses and enterprises were shuttered by way of orders issued by public health officials, politicians and various administrators.
One of the direct causes of those shutdowns was the development of shortages.
According to a number of economists, the combination of shortages of various goods and services and massive programs of “quantitative easing” led to substantially higher rates of inflation.
In consequence of shuttered economies and higher rates of inflation in the first world, less developed countries suffered greatly, due, in part, to shortages of supplies and due to lowered demand.
For some time, in its articles about China, The Wall Street Journal has pointed to “covid” related lockdowns as being one of the major causes of China’s downturn in its economy.
In the US, by October of 2020, over 100,000 businesses had been shuttered by way of lockdowns
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