A rise in SNB interest rates is only expected when the ECB raises its key interest rate. This is revealed by an investigation by the KOF, in collaboration with the NZZ.
In March, the KOF, in collaboration with the The New Zurich Times (NZZ), asked 110 economists from Swiss colleges and universities regarding their estimates of inflation and monetary policy in Switzerland. More than half of participants believe that the policy rate will be positive over the next five years. A rise in SNB interest rates is only expected once the ECB raises its key rate.
In Switzerland, consumer prices increased in February and March 2022, compared to the previous year, to a level not reached since the financial crisis of 2009. According to the economists surveyed, the main cause of the high inflation rates is an increase in costs due, for example, to high input or energy prices as well as staff or delivery shortages. Demand-related price pressure is considered less significant. Inflation rates have been rising steadily in Switzerland for several months. Will inflation rates normalize soon or will inflationary trends persist for a few more months? 63% of economists who gave their opinion believe that the current price dynamics are of a (rather) temporary nature and 37% (rather) long-lasting. As for the rate of inflation five years from now, regarding three-quarters of survey participants expect it to be within the 0% to 2% fluctuation band set by the Swiss National Bank ( SNB).
The majority of respondents consider the SNB’s monetary policy to be appropriate
With a rise in consumer prices of 2.2% in February and 2.4% in March 2022 compared to the values of the previous year, inflation is outside the zone that the SNB equates to the price stability. The question therefore arises as to whether the current monetary policy is still justified or whether a more restrictive course would be necessary to control inflation. According to the survey results, more than half of economists consider the monetary policy measures implemented in Switzerland to be appropriate, while 44% believe that monetary policy is (rather) too expansive. Over the past three years, the position taken by economists vis-à-vis the orientation of the SNB’s monetary policy has not changed much. Already at the end of 2019, in a KOF-NZZ survey of economists, two “camps” of similar size considered monetary policy to be appropriate, respectively (rather) too expansive, and only a few voices who considered it (rather) too restrictive.
In Switzerland, the policy rate has been negative since January 2015. More than half of the economists surveyed expect the policy rate to be positive over the next five years. They are still 38% to count on a key rate around 0%. Only 6% think the policy rate will be regarding the same as it is now or slightly less negative. At the end of 2019, it was not the same speech: during the survey at the time, a minority expected an imminent turning point in interest rate policy: 22% of the participants in the survey then expected a positive interest rate in the next five years. Regarding the normalization of monetary policy, the discussion often focuses on the probability that the SNB will raise its key rates before the European Central Bank (ECB): 94% of the researchers questioned estimate that the probability that the SNB will raise interest rates before the ECB is (very) weak.
One in two people expect a nominal revaluation of the Swiss franc
The Swiss franc has appreciated relatively continuously in nominal terms once morest the currencies of its main trading partners in recent years. With regard to the development over the next twelve months, more than half of the survey participants expect a (slight) appreciation of the Swiss franc.
No consensus on how the ECB’s course should be adapted to the war in Ukraine
The ECB is also currently in a difficult situation: while the sharp rise in consumer prices would rather argue in favor of a more restrictive monetary policy, the economic risks linked to the war in Ukraine rather call for a more expansive orientation. The researchers surveyed are not unanimous regarding how the ECB should adjust its monetary policy following the war in Ukraine: 35% are in favor of a (slightly) more restrictive monetary policy stance, 46% an unchanged stance and 19 % to a (slightly) more expansive orientation compared to a hypothetical situation without war.
