Central bank warns of inflationary pressures

The president of the Swiss National Bank, Jean-Pierre Roth, says he's concerned about inflation in Switzerland as a result of continuing high oil prices.

He said the central bank remained “very vigilant” on the issue and would take it into account at its next interest rate assessment next month.

In an interview with the weekly Handelszeitung newspaper, Roth said inflationary pressures had heightened, adding this was a “surprise” for the bank.

Inflation in Switzerland fell to 2.3 per cent in April from a 14 ½ year high of 2.6 per cent in March. The annual inflation rate has been above the two per cent threshold that the bank equates with price stability since December.

“The oil price is climbing further and is causing a problem for all industrialised countries, because inflation is clearly accelerating everywhere. That is a new situation,” he said.

Asked whether the bank would raise its key target interest rate from 2.75 per cent, Roth commented: “We will see. Today I can only say that we are keeping a close eye on inflation and will take suitable measures if they are necessary.”

The bank had previously forecast inflation to fall below two per cent during the year.

In other remarks, Roth said he felt that the worst of the current financial crisis was over and economies in Europe were doing well.

But he called for stricter rules for international banks regarding their capital adequacy.

He also called on the Swiss Federal Banking Commission – the watchdog body of financial institutions – to take a tougher stance against the banks, saying they were now trying to minimise the damage.