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Swiss National Bank Vice Chairman Suggests Further Rate Hikes Possible

Swiss National Bank Vice Chairman, Martin Schlegel, expressed concern over Swiss inflation, which is low compared to other countries but still higher than desired. Schlegel hinted at potential further interest rate hikes to address the issue.

Martin Schlegel, Swiss National Bank Vice Chairman
Martin Schlegel, Swiss National Bank Vice Chairman

Current Inflation and SNB Targets

Swiss inflation dropped to 2.9% in March, down from 3.4% in February. However, it remains above the Swiss National Bank's target of 0-2%, which they consider indicative of price stability. Consequently, the SNB has raised interest rates in its last four monetary policy meetings.

Inflation Projections and Priority

The central bank projects a gradual decline in Swiss inflation, reaching 2.6% this year and then 2% in both 2024 and 2025. Despite these projections, Schlegel warned against complacency, emphasizing that price stability is their top priority.

SNB Chairman's Remarks on Rate Hikes

Schlegel's comments align with those of SNB Chairman Thomas Jordan, who also mentioned the possibility of raising interest rates again last week.

Swiss Property Market Risks

The Vice Chairman acknowledged the surge in Swiss property prices, driven by post-pandemic demand for larger homes and a growing population. He noted the risk of a market correction, as price increases have outpaced fundamental factors such as wage growth and rent prices.

Home Loans and Bank Resilience

As more people have taken on home loans linked to market interest rates, which have become more expensive recently, Schlegel acknowledged the increased risks. However, he also stated that Switzerland's banks are well-prepared to handle any downturn in housing prices.