Swiss National Bank does not rule out more interest rate hikes

ZURICH (Reuters) – The Swiss National Bank cannot rule out that it will have to raise interest rates again to bring inflation under control, Chairman Thomas Jordan said on Tuesday.

“We cannot rule out that we will have to further tighten monetary policy,” said Jordan in his final public appearance before the SNB makes its next decision on interest rates on March 23.

The central bank was also ready to intervene in currency markets, buying and selling foreign currencies, to achieve its goal of price stability, Jordan told an event in Zurich.

Markets are now expecting stronger action from the SNB later this month after Swiss annual inflation increased to 3.4% in February, above the SNB’s target level of 0-2%.

The market now sees a 52% probability the central bank will increase its policy rate by 75 basis points from the current level of 1%, and a 48% probability for a 50 basis point hike.

Jordan said that although Swiss inflation was low by international comparison, it was still outside its goal.

Wage increases were also higher than previous years, he said, while it was easier for companies to pass on these increases by raising their prices.

“That makes the whole situation more vulnerable and monetary policy more difficult,” Jordan said. “We have to follow the situation closely.”

Credit Suisse on Monday raised its forecast for the SNB’s policy rate, saying it now expected a 75 basis point hike instead of its previous view for a 50 basis point increase.

UBS meanwhile expects a 50 basis point increase in March, and keep rates stable for the rest of 2023.

“However, risks are clearly to the upside and we’re at the moment assessing the situation,” said UBS economist Alessandro Bee.

(Reporting by John Revill; Editing by Chris Reese and Chizu Nomiyama)