![Chairman of the Swiss National Bank: Monetary policy is not tight enough to ensure price stability](https://image.cnbcfm.com/api/v1/image/107260696-16874294141687429412-29992655858-1080pnbcnews.jpg?v=1687429732&w=750&h=422&vtcrop=y)
The Swiss National Bank favored a smaller rate hike at its quarterly monetary policy meeting on Thursday, but said further hikes could also be needed to bring inflation back to focus on.
The SNB announced a hike of 25 basis points, bringing its key rate to 1.75%, as expected in a Reuters poll of economists.
That is the fifth increase in a row because it began moving rates of interest out of negative territory in June 2022, even though it had previously enacted hikes of fifty or 75 basis points.
Inflation in Switzerland fell to 2.2% in May from 2.6% in April, placing it well below its Eurozone neighbours, where the typical inflation is 6.1%.
Nevertheless, the SNB said in a statement it was “counteracting inflationary pressures which have picked up again within the medium term.” The goal is inflation below 2%.
“It can’t be ruled out that additional SNB rate hikes can be vital to make sure price stability within the medium term,” the central bank said, adding that it might take motion within the foreign exchange market if vital and deal with selling foreign currency echange to make sure stability monetary.
Although the SNB originally of last 12 months tried suppress growth Swiss franc, which gained from market instability now aiming selling foreign currency to extend its value as a way to reduce import costs.
The SNB expects inflation to fall to 1.7% within the third quarter, then rise to 2% within the fourth and step by step increase by several percentage points in 2024 because of second-round effects and a few domestic inflationary pressures, corresponding to rental prices.
“This upward revision of forecasts is a particularly hawkish signal and suggests that the SNB will raise rates of interest again,” economists at Dutch bank ING wrote in a note.
“At a time when other central banks appear to have lost confidence of their models and are looking primarily on the actual rate of inflation, the SNB appears to be taking a different approach, focusing totally on inflation projections,” they wrote.
“After September, the SNB rate is likely to stay at 2% and a rate cut seems unlikely between now and 2026.”
The SNB has come under the highlight in recent months for its role in facilitating the emergency takeover of Credit Suisse by UBS.