Swiss National Bank again tightens monetary policy, ups rate to 1.75%

Additional rises in the SNB policy rate cannot be ruled out as those will be necessary to ensure price stability over the medium term, the bank said in a release.

To provide appropriate monetary conditions, the SNB also remains willing to be active in the foreign exchange market as necessary. The focus is on selling foreign currency now.

Inflation has significantly declined in recent months, and stood at 2.2 per cent in May. This drop was attributable to lower inflation on imported goods, in particular lower prices for oil products and natural gas.

The new forecast puts average annual inflation at 2.2 per cent for 2023 and 2024, and 2.1 per cent for 2025. Without today’s policy rate increase, the inflation forecast would be even higher over the medium term, the bank noted.

Swiss gross domestic product (GDP) growth was solid in the first quarter this year. There was a slight increase in value added in manufacturing. The labour market remained robust, and overall production capacity has been well utilised.

However, the central bank expects modest growth for the remainder of the year as subdued demand from abroad, the loss of purchasing power due to inflation, and more restrictive financial conditions are having a dampening effect.

Overall, GDP is likely to grow by around 1 per cent this year. In this environment, unemployment will probably rise slightly, and the utilisation of production capacity is likely to decline somewhat.

Fibre2Fashion News Desk (DS)