Central bank boss confident inflation is under control

Hans Meyer says low inflation can be sustained. Keystone / Edi Engeler

The president of the Swiss National Bank, Hans Meyer, says he believes Swiss interest rates are close to their peak and that inflation will not cause problems for the economy.

In an interview with the “Schweizer Illustrierte” weekly magazine, Meyer was asked if rates had peaked. “I would be surprised if we were far away,” he said. “We don’t enjoy high interest rates but we have to guarantee overall economic stability”.

The National Bank has pushed up interest rates by around 175 basis points so far this year to counter rising inflationary pressures, caused by strong economic growth of nearly four per cent in the first half.

Meyer forecast that economic growth would average about three per cent this year and that inflation would be 1.5 per cent. This is in line with the National Bank’s previous forecasts, which predict that growth will slow while inflation rises slightly.

He told the magazine that the rise in oil price was problematic because it had triggered a “psychological shock”. He added that there were risks that high oil prices could slow economic growth and fuel inflation.

“There is a chance that oil prices will settle down. The question is only at what level,” he said in the interview.

The outgoing head of the National Bank said the Swiss franc’s exchange rate was “plausible and correct”. He said the strong United States dollar was a “detrimental factor” but that the Swiss economy was more strongly tied to Europe’s, making the euro the more important currency for Switzerland.

Meyer also believes the euro will eventually recover from its spell of weakness, but said it was difficult to say where the threshold of pain lay for the euro/Swiss franc exchange rate. He added that the exchange rate was only one factor in the overall economic environment.

Asked how long the Swiss franc would exist as an independent currency, he said: “Another 10 years in any event.” He explained that as long as neutral Switzerland kept its distance from the European Union. Switzerland would keep the franc.

swissinfo with agencies