Central Banks Moved Too Slowly on Inflation, SNB’s Jordan Says

This content was published on October 7, 2022 – 12:00 October 7, 2022 – 12:00

(Bloomberg) — The world’s top central banks reacted too slowly to accelerating prices, according Swiss National Bank President Thomas Jordan.

“Inflation has been underestimated globally,” Jordan said in Zurich, adding that leading rate setters “very likely waited too long” combating it. “But you have to say: Uncertainty was exceptionally high in this situation — and stays high,” he said. “Central banks also make wrong projections, that will always be the case.”

Jordan will have the opportunity to share his views directly with many of his counterparts when heads to Washington next week, where he is set to meet with officials from around the world at the annual meeting of the International Monetary Fund and the World Bank. The SNB started hiking interest rates in June with a half-point increase and added another 75 basis points last month.

The Swiss inflation rate slowed recently to 3.3%, but Jordan — in comments that will be broadcast on national television on Sunday — cautioned it might rise again before decelerating. 

“We are not out of the woods yet,” he said. 

The SNB sees consumer-price growth averaging at 3.4% through the first quarter of next year, before slowing below 2% toward the end of 2023. 

The eurozone surrounding Switzerland faces inflation three times as high, recently hitting double-digits. Key reason for this is the strong Swiss franc, limiting imported inflation. 

According to Jordan, the SNB started to allowed the franc to appreciate from 2021. 

“We no longer call the franc overvalued,” he said, adding that the SNB is ready to intervene in foreign exchange markets if the currency becomes too strong or too weak. He declined to elaborate on the level which might trigger such a move. 

In the second quarter, the central bank surprisingly trimmed its foreign exchange portfolio, drawing a line on more than a decade of efforts of keeping the currency in check. The franc in turn appreciated above parity with the euro. Still, officials are expected to raise rates again in December to further slow inflation.

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