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2020 May Be a Rare Case of Swiss Topping Euro-Area Inflation

(Bloomberg) -- Price pressures in Switzerland are set to outpace those in the euro area in 2020, a rare occurrence for the typically more muted Swiss inflation. The Swiss National Bank expects the headline rate to touch 2.1 percent in the third quarter of that year, breaching the upper limit for price stability.

The Swiss forecast -- which is based on the assumption of three-month franc Libor at minus 0.75 percent -- prompted questions as to whether that might signal an interest-rate increase by the SNB down the road.

“Not at all,” said SNB President Thomas Jordan in a Bloomberg Television interview when asked whether the inflation forecast complicated policy making. “We are convinced that the inflation pressure remains low and that we have a relatively long time before we have to adjust monetary policy.”

The SNB currently has the lowest deposit rate of any major central bank, in a bid to maintain the interest-rate differential with other jurisdictions and stem inflows into the franc.

The European Central Bank signaled after a monetary-policy meeting on Thursday that it has no intention of raising borrowing costs any time soon.

“We rule out an SNB interest-rate increase until well into 2019 because the ECB is moving only rather hesitantly on its path to a normalization of its expansive monetary policy,” said Christian Lips, an economist at Nord LB. “Moreover, with a view toward Donald Trump, Brexit and the Italian elections, a return of political risks can’t be excluded.”

--With assistance from Richard Jones and Jana Randow

To contact the reporter on this story: Catherine Bosley in Zurich at

To contact the editors responsible for this story: Fergal O'Brien at, Zoe Schneeweiss, Paul Gordon

©2017 Bloomberg L.P.

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