SNB’s Jordan Puts Switzerland’s Neutral Interest Rate Around 2%

Switzerland’s neutral interest rate may be a bit lower than that of other advanced economies, according to Swiss National Bank President Thomas Jordan.

(Bloomberg) — Switzerland’s neutral interest rate may be a bit lower than that of other advanced economies, according to Swiss National Bank President Thomas Jordan.

The rate that neither slows nor accelerates output typically is “in the range of 2%-to-3% in developed countries, while in Switzerland it might be slightly lower,” Jordan told Swiss newspaper Corriere del Ticino in an interview published on Saturday.

While the president added that the neutral rate can only be an estimate, his comments suggest that the SNB might not be finished tightening after a likely 25 basis-point move to 1.75% later this month. 

Swiss consumer-price growth still exceeds the central bank’s 2% ceiling. The central bank chief said the question of where the neutral rate lies only becomes relevant “once inflation falls within the range of price stability.” 

The SNB’s hawkish stance was underscored earlier this week, when Jordan said that the current Swiss rate of 1.5% “is relatively low, and it’s not a really good idea to wait and then have higher inflation later.”

Jordan also told Corriere del Ticino:

  • The dollar will keep its status as global reserve currency.
    • “The idea that some other currency of another country can provide exactly what the United States does right now” is “a long way off.”
  • The SNB is “open to reconsider” its position in the future that a central-bank digital currency for the general public — a digital Swiss franc or retail CBDC — would do more harm than good.
    • For the moment, though, “we do not yet see a case for its practical use.”
  • Distributed ledger technology “could increase the efficiency of the financial market infrastructure.”
    • To test the advantages of DLT, the SNB has announced to issue a wholesale CBDC for the use between financial institutions.

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