© Reuters. FILE PHOTO: Swiss National Bank (SNB) Vice-Chairman Fritz Zurbruegg attends a news conference in Bern, Switzerland June 18, 2020. REUTERS/Arnd Wiegmann
ZURICH (Reuters) – The Swiss National Bank will consider how persistent higher Swiss inflation is when it decides its future monetary policy next month, Vice Chairman Fritz Zurbruegg said on Tuesday.
Zurbruegg said there were no signs of higher Swiss inflation spilling over into broader issues like higher wage demands from workers or higher price expectations among the general public, both developments which could trigger a shift away from SNB’s current ultra-loose monetary policy.
“The key question for us is how solidified inflation is,” Zurbruegg told an event in Zurich. “The amount of uncertainty is clearly higher than in the past, but it’s temporary factors which are driving inflation.”
Swiss inflation reached 2.5% in April, its highest level since 2008, and outside the SNB’s goal of 0-2%.
The development has sparked market expectations the SNB could start hiking its policy interest rate from minus 0.75%, the lowest in the world.
Still, the main factors driving higher prices, such as supply chain bottlenecks and higher fuel costs, were likely to be temporary, Zurbruegg said.
The high value of the Swiss franc had also dampened the effect of import prices into Switzerland and moderated inflation, he added.The SNB in March said it expects inflation to decline to 0.9% in both 2023 and 2024, although the bank is due to give new forecasts at it monetary policy assessment on June 16.
Switzerland had also so far not seen demands for higher wages like in the United States and the eurozone, Zurbruegg said.
“Because if we got into that kind of wage-price spiral, that would obviously lead to a significant increase in the persistence of high inflation rates,” he said.
“Another important point is inflation expectations. If we want to avoid this situation, of self-reinforcing processes, it is important what consumers think about prices in five years, in ten years,” Zurbruegg said. “Here, we still see relatively little movement in Switzerland.”
Swiss National Bank will examine persistence of inflation – Vice Chairman