The SNB should not be able to pay a profit-sharing contribution to the cantons and the Confederation this year. The exercise will in all likelihood end with a loss, institute director Thomas Jordan said on Saturday.
In the first nine months of 2022, the SNB suffered a loss of 140 billion francs. The evolution of the 4th quarter does not show any reversal, said Mr. Jordan in an interview with the program ‘Samstagsrundschau’ of the SRF radio.
However, we will have to wait until the end of the exercise to be certain. By then, “it would take almost a miracle to achieve a positive result,” said the director of the SNB.
It has certainly already happened, notably in 2010, that the issuing institution pays a sum to public authorities despite a loss-making exercise. But this case is exceptional and was explained in 2010 by the fact that the loss had taken everyone by surprise and that the Confederation and the cantons had budgeted for these revenues. But this year, we have known since the spring that we should hardly count on the manna of the SNB.
In addition, the rules for the payment of profits have since been changed, Jordan said. There is also a greater understanding of the fact that the SNB is not in a position to always pay a contribution.
Currency sales
The main reason for the SNB’s losses is selling currencies, Jordan said. To strengthen the franc and counter inflation, the SNB has been working for months to reduce its foreign currency reserves. Equity markets have also been falling since the start of the year.
Regarding inflation, the head of the SNB said he was moderately optimistic. He cannot rule out further increases in the key rate, following the one announced on Thursday. In any case, we should not expect that the inflation can be brought back to the desired zone – between 0 and 2% – before the end of 2023.
No recession in sight
Thomas Jordan indicated that we should not fear that inflation will jump in Switzerland as in certain European countries, where it can flirt with 10%. He acknowledged, however, that the SNB had long underestimated the risks of inflation last year. But the war in Ukraine ‘was not yet predictable then’, he added.
Furthermore, the forecasting models used are ‘not optimal’. They should be supplemented with “a little common sense”, he pleaded.
In terms of growth, Thomas Jordan believes that Switzerland is better equipped than many of its competitors. Admittedly, growth is expected to be lower in 2023 compared to this year, but there should be no recession, contrary to what Germany is forecasting, for example.
/ATS
