Swiss inflation tamed by rate hikes and FX sales

ZURICH: Swiss inflation has fallen not just because of lower energy prices and easing supply chain botlenecks but thanks to the central bank’s interest rate rises and foreign exchange interventions, governing board member Antoine Martin said on Thursday.

Speaking at an event in Zurich, Martin said the central bank expects inflation to remain in its target range over the next few years.

“While the easing of global supply chain constraints and lower energy prices helped, the SNB’S adjustment of monetary conditions played a key role in reducing inflationary pressures,” Martin said.

Swiss prices rose by 1.0% in March, the lowest year on year increase since September 2021, and well within the 0-2% target range the central bank calls price stability.

“Our latest forecast indicates that inflation is likely to remain within the price stability range over the next three years, even taking into account the recent interest rate cut,” Martin said.

The SNB became the first major central bank to dial back restrictive monetary policy when it cut its policy rate to 1.5% last month. Markets expect another cut in June.

Martin, who joined the SNB’S rate-seting governing board in January, said foreign currency interventions had been an effective additional tool.

The SNB sold nearly 133 billion francs worth of foreign currencies last year, to support the franc’s value which shielded Switzerland from imported inflation.