SNB’s Jordan Sets High Bar for Unscheduled Rate Increase

This content was published on September 22, 2022 - 12:02

(Bloomberg) -- The Swiss National Bank would consider a monetary policy move before December “if something really important changes,” President Thomas Jordan said, setting a high bar for any move between scheduled decisions. 

“Usually we take our monetary policy decisions at our quarterly meetings,” he told Bloomberg Television in an interview in Zurich after officials raised interest rates by 75 basis points on Thursday. “Of course if something really important changes, if our inflation outlook would completely change, then we have really the freedom also to make decisions between two meetings.”

He didn’t elaborate on whether a major currency move might augur that. The franc, which touched a seven-year high earlier on Thursday, then fell 2% against the euro after the SNB hike fell short of traders’ expectations for an even bigger move. 

Until June, when the Swiss first began raising rates, their prior policy shifts of recent years typically took investors by surprise at moments between scheduled decisions.

By sticking to the quarterly calendar, officials are essentially reassessing their stance only half as often as the European Central Bank, which means that if they seek to follow hikes in the surrounding euro area, they will do so with a lag and perhaps require very large increments. 

So far this year, the SNB has matched the ECB’s moves, with 1.25 percentage point in increases delivered in both jurisdictions. 

While Jordan signaled any unscheduled hike is unlikely, because most data come quarterly in tandem with the central bank’s gatherings, he insisted it can’t be ruled out. 

“We have really the option also to do a meeting or a decision in between,” he said. “We will look very closely at the data, at what has an impact on our inflationary outlook, and then take the right decision.”

Asked how Switzerland is coping with the cost-of-living crisis afflicting the region, Jordan said that his country is “a little bit fortunate” because of the smaller role energy prices play there.  

“Of course the increase in energy prices creates a difficult situation for all households, especially those with lower income,” he said. “The Swiss National Bank can do not that much in that respect.”

(Updates with franc in third paragraph)

©2022 Bloomberg L.P.

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