The General Assembly of the SNB devoted to the consequences of the war in Ukraine –

The president of the Swiss National Bank (SNB), Thomas Jordan, expects slower growth and higher prices due to the war in Ukraine. At Friday’s general meeting of shareholders in Bern, he assured that he would do his best to counteract these phenomena.

After two years of pandemic, the war in Ukraine and its economic struggle are the new challenge for the National Bank and all central banks in the world. On Friday, the outbreak of this crisis topped the speech of the President of the Swiss National Bank, Thomas Jordan.

“The current global political situation was unimaginable at our last general meeting a year ago. The long-term consequences of the war in Ukraine for the structures of the world economy and monetary policy are difficult to estimate today. But one thing is certain: the many challenges. And we have to work hard to ensure price stability in Switzerland. This is the most important contribution that the SNB can make to the population,” said Thomas Jordan.

slow economy

The economic situation, also in Switzerland, is being slowed down by the war in Ukraine. For the current year, the SNB expects a growth of the Swiss gross domestic product (GDP) of 2.5%, half a point less than before the outbreak of the war. Inflationary pressures have also increased in Switzerland, but have so far been relatively moderate.

While inflation averaged 0.6% per year in 2021, it reached 2.4% in March. It is therefore higher than the price stability criterion in a range between 0% and 2%. If it were to deviate significantly from the annual rate of 2.4% recorded in March, the SNB would not hesitate to increase its rates. “If inflationary pressures should increase and increase, we will not hesitate to take the necessary measures to ensure price stability,” said Thomas Jordan.

Reduce the key interest

During its review of the economic and monetary situation on March 24, the SNB decided to keep its key rate at -0.75% and confirmed its willingness to intervene in the foreign exchange market if necessary. “We had already emphasized in December that we would tolerate some appreciation of our currency,” said Thomas Jordan. “We have deliberately tolerated this situation, because inflation abroad is significantly higher than in Switzerland,” he continued. As a result, the Swiss economy is able to withstand a stronger franc nominally.

The bank has so far not raised its key interest rate as inflationary pressures in Switzerland are subdued and inflation is expected to return to the price stability zone in the near future. “Our inflation forecast shows that inflation will average 2.1% this year and fall again in the next two years,” said Thomas Jordan.

“Fragmentation of the Global Economy”

“From the current perspective, we may very well live in a less integrated world in the medium term than we do now,” said the SNB chairman. A fragmented global economy would increase the cost of producing many goods and would likely lead to more frequent supply problems.

“The result would be greater volatility in inflation and in the economy. In short, monetary policy should focus more often and more intensively on fighting inflation than has been the case in recent years,” predicts Thomas Jordan.

Difficult to see in the long run

At the moment it is still difficult to estimate the long-term consequences of the war in Ukraine for the structure of the world economy and thus for monetary policy. Would the traditional interest rate instrument be used more often or could unconventional measures play a major role in absorbing negative interference? That is the central question of the president.

“The first question is whether the level of neutral interest rates will remain low or rise again,” he says. “Both possibilities are possible.”

TV subject: Christophe Gaberel and Pascal Jeannerat

Web customization: mh with ats

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