“The interest rate decision is absolutely justified”

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The SNB adheres to its strict line in the fight against inflation and raises the key interest rate by 0.5 percentage points again to 1.5 percent. Inflation in Switzerland last rose to 3.4 percent in February. The U.S. Federal Reserve is now acting in a completely different way, raising the key interest rate by just 0.25 percent on Wednesday. The Fed feared a larger move could exacerbate turmoil in the US banking sector. SNB Vice President Martin Schlegel (47) explains the SNB strategy to Blick.

Will the new interest rate increase not have any negative effects on the banking sector?
Martin Schlegel: Every three months, we conduct a due diligence where we consider all the factors that influence our decision. We just did this this week. We came to the conclusion that the interest rate decision was absolutely justified. Inflation is still outside our target range.

The rise in interest rates will eventually also lead to higher rents.
Of course, this one got caught on our radar. When average mortgage interest rates rise, rents rise as well, which has an effect on inflation. We took this into account. However, inflation will continue to rise in general without an increase in interest rates.

How high is the reference interest rate?
We do not make any estimates regarding the reference interest rate. This is calculated from the average interest rate on all mortgages. This means it moves relatively slowly. Market watchers assume that the benchmark rate will rise in the second quarter of this year.

Can consumers expect prices to drop soon, thanks to the interest rate movement?
The task of the Central Bank is to ensure price stability. We define this as inflation between 0.5 and 2 percent. Currently, inflation is significantly high. But if you look at our estimation, it should fall below 2 percent again in the medium term and return to the target range. However, we reserve the right to further increase interest rates.

Source :Blick