Economy
Swiss central bank raises rates again, signals may need to do more
The Swiss National Bank raised its policy interest rate by 25 basis points on Thursday as the central bank pressed ahead with its campaign to dampen stubborn inflation and left the door open for more tightening.
Chairman Thomas Jordan pointed to rising inflationary pressures and the danger of price increases becoming entrenched.
Although inflation has declined compared with a year earlier, there was still more work to be done, Jordan told reporters.
“The marked decline in recent months is very welcome,” Jordan said. “This is also the result of our monetary policy which is now significantly more restrictive than one year ago.
“Nevertheless the underlying inflationary pressure has risen further,” He added. “We are therefore observing persisting second-round effects in many domestic goods and services.”
As a result, Jordan said he could not rule out further increases.
On Thursday the SNB increased its policy rate and the rate it charges on sight deposits to 1.75% from the 1.5% level set in March.
The increase, in line with forecasts in a Reuters poll, meant Swiss interest rates were now at their highest level since October 2008.
Jordan acknowledged that higher interest rates were leading to higher rents, with the knock-on effect of adding to inflation.
Still, he said this would not deter the SNB from hiking again.
“Without a more restrictive monetary policy, there would be a danger of inflation becoming entrenched and much stronger rate increases would be needed in the future.”
Even with the Thursday’s rate increase, the SNB forecast Swiss inflation would remain above its 0-2% target by 2026.
In its first forecast for the period, the SNB said it expected inflation to be at 2.1% in the first quarter of 2026.
The central bank also raised its inflation forecasts for 2024 and 2025.
The SNB said it also remained ready to intervene in currency markets to maintain price stability, which it defines as an inflation rate of 0-2%.
In recent months the SNB has been selling foreign currencies to boost the value of the Swiss franc, whose strength has reduced the effect of more expensive imports.
In the last 12 months the SNB has switched focus from tackling the high value of the Swiss franc to combating price rises which it has said run the risk of becoming entrenched and harder to shift.
Although modest by international standards, at 2.2% in May, Swiss inflation has remained above the SNB’s 0-2% target range since February 2022, with rent increases later this year also expected to add to price pressures.
© Reuters. Russian Central Bank Governor Elvira Nabiullina attends a news conference in Moscow, Russia June 14, 2019. REUTERS/Shamil Zhumatov/File Photo
MOSCOW (Reuters) – Russia’s central bank will need two to three months to make sure that inflation is steadily declining before taking any decision on interest rate cuts, the bank’s governor Elvira Nabiullina told RBC media on Sunday.
The central bank raised its key interest rate by 100 basis points to 16% earlier in December, hiking for the fifth consecutive meeting in response to stubborn inflation, and suggested that its tightening cycle was nearly over.
Nabiullina said it was not yet clear when exactly the regulator would start cutting rates, however.
“We really need to make sure that inflation is steadily decreasing, that these are not one-off factors that can affect the rate of price growth in a particular month,” she said.
Nabiullina said the bank was taking into account a wide range of indicators but primarily those that “characterize the stability of inflation”.
“This will take two or three months or more – it depends on how much the wide range of indicators that characterize sustainable inflation declines,” she said.
The bank will next convene to set its benchmark rate on Feb. 16.
The governor also said the bank should have started monetary policy tightening earlier than in July, when it embarked on the rate-hiking cycle.
© Reuters. FILE PHOTO: Workers walk past an under-construction area with completed office towers in the background, in Shenzhen’s Qianhai new district, Guangdong province, China August 25, 2023. REUTERS/David Kirton/File Photo
SHANGHAI (Reuters) – China’s top planning body said on Saturday it had identified a second batch of public investment projects, including flood control and disaster relief programmes, under a bond issuance and investment plan announced in October to boost the economy.
With the latest tranche, China has now earmarked more than 800 billion yuan of its 1 trillion yuan ($140 billion) in additional government bond issuance in the fourth quarter, as it focuses on fiscal steps to shore up the flagging economy.
The National Development and Reform Commission (NDRC) said in a statement on Saturday it had identified 9,600 projects with planned investment of more than 560 billion yuan.
China’s economy, the world’s second largest, is struggling to regain its footing post-COVID-19 as policymakers grapple with tepid consumer demand, weak exports, falling foreign investment and a deepening real estate crisis.
The 1 trillion yuan in additional bond issuance will widen China’s 2023 budget deficit ratio to around 3.8 percent from 3 percent, the state-run Xinhua news agency has said.
“Construction of the projects will improve China’s flood control system, emergency response mechanism and disaster relief capabilities, and better protect people’s lives and property, so it is very significant,” the NDRC said.
The agency said it will coordinate with other government bodies to make sure that funds are allocated speedily for investment and that high standards of quality are maintained in project construction.
($1 = 7.1315 renminbi)
© Reuters. Russian Central Bank Governor Elvira Nabiullina attends a news conference in Moscow, Russia June 14, 2019. REUTERS/Shamil Zhumatov/File Photo
MOSCOW (Reuters) – Russia’s central bank will need two to three months to make sure that inflation is steadily declining before taking any decision on interest rate cuts, the bank’s governor Elvira Nabiullina told RBC media on Sunday.
The central bank raised its key interest rate by 100 basis points to 16% earlier in December, hiking for the fifth consecutive meeting in response to stubborn inflation, and suggested that its tightening cycle was nearly over.
Nabiullina said it was not yet clear when exactly the regulator would start cutting rates, however.
“We really need to make sure that inflation is steadily decreasing, that these are not one-off factors that can affect the rate of price growth in a particular month,” she said.
Nabiullina said the bank was taking into account a wide range of indicators but primarily those that “characterize the stability of inflation”.
“This will take two or three months or more – it depends on how much the wide range of indicators that characterize sustainable inflation declines,” she said.
The bank will next convene to set its benchmark rate on Feb. 16.
The governor also said the bank should have started monetary policy tightening earlier than in July, when it embarked on the rate-hiking cycle.
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