SNB ready to take “all measures necessary” to tame inflation: chairman

The Swiss National Bank (SNB) is prepared to take “all measures necessary” to bring inflation back down to its 0-2 per cent target range, chairman Thomas Jordan said on Friday (Nov 11) .

“We will take all measures necessary to bring inflation back into the territory of price stability. This is our mandate and our ambition,” Jordan told an event in Bern.

“The current monetary policy is not sufficiently restrictive to bring inflation back to the range of price stability over the medium term.”

The SNB would use interest rates as well as currency purchases and sales to steer policy towardss its goal, he said.

The SNB appears to be preparing for further interest rate hikes to combat inflation after already raising rates twice this year to the current level of 0.5 per cent.

The market now has a 65 per cent probability of a 50-basis-point hike at the next SNB policy meeting on Dec 15 with a 35 per cent probability of a 25 basis point increase.

Jordan’s governing council colleague Andrea Maechler said in an interview published on Friday that further interest rate hikes could be necessary to combat inflation.

Swiss inflation eased to 3.0 per cent in October from 3.3 per cent in September although still remained high by Swiss standards.

Jordan said that the further a country’s inflation level was above its price stability target, the more costly it was to bring it down again.

This meant a speedy and effective response was required to prevent an inflationary environment becoming entrenched.

“In Switzerland we had this experience in the 1970s and 1980s and again in the early 1990s. When you have to bring inflation back when it is above 4 per cent, 5 per cent or 6 per cent it is always extremely costly,” Jordan said.

“So it is extremely important that we have a initial reaction to this increase in inflation in order to bring it back.”

Still, Jordan noted monetary policy was in a difficult situation, with business activity weakening in Switzerland while there were also risks of energy shortages pushing inflation higher. REUTERS