According to a study published Wednesday, the SNB theoretically has two options for fighting inflation. On the one hand, it can continue to spin the interest screw. On the other hand, it is possible to fight inflation by shrinking the balance sheet. According to the study, the SNB could therefore sell foreign assets, allowing the franc to appreciate in value and thereby contain inflation.
“These are two extreme positions, of course you can use a combination of the two instruments,” said Yvan Lengwiler, professor at the University of Basel and part of the “SNB Observatory” on a conference call. The problem, however, is that their policies are currently relatively uncertain.
There are statements from top SNB representatives that they want to rely on a pure interest rate policy. At the same time, central bank statistics pointed to asset sales. The conclusion of the study was “More clarity about the monetary policy intentions of the SNB is desirable”.
Which path the SNB takes is extremely important. For example, a strategy of downsizing the balance sheet due to the appreciation of the Swiss franc hurts the export economy but benefits consumers.
Yvan Lengwiler, Geneva professor emeritus Charles Wyplosz, and Stefan Gerlach, chief economist at private bank EFG and former vice-president of the Central Bank of Ireland, are behind the “SNB Observatory”.
(SDA)