In retrospect, monetary policy everywhere has been too expansionary: the head of the Swiss central bank

“We probably all underestimated the inflationary pressure in 2021,” Jordan told CNBC.

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Monetary policy was “too expansionary” in previous years and the current surge in consumer prices has yet to be brought under control, Swiss National Bank President Thomas Jordan said on Friday.

“Probably in hindsight, monetary policy everywhere was a bit too expansionary,” Jordan said when asked by CNBC’s Joumanna Bercetche if the current economic situation would have been different if the central banking community had reacted more quickly to signs of a downturn. inflation.

“We probably all underestimated the inflationary pressure in 2021,” Jordan told CNBC during a panel at the World Economic Forum in Davos.

While inflation is likely to decline in 2023, after hitting a three-decade high in Switzerland in August and a eurozone record in October, Jordan said the jump from 4% to 2% would be difficult.

“Underlying inflation is not falling rapidly,” Jordan said. “It will be much more difficult to bring inflation down from 4% to 2% – so the commitment of central banks to return to price stability will be absolutely essential,” he added.

A stricter monetary policy “is necessary”

Jordan stressed that price stability should be the “top priority” of central banks, but he was unable to say whether a recession was on the horizon.

“I hope it will have a limited impact on the real economy, but it’s hard to predict,” he said.

Changing wage expectations and corporate responses to rising inflation show that it will be difficult to bring inflation down and that even tighter monetary policy could be considered in Europe and the United States, according to the president of the central bank.

“Inflation is still at a level where tighter monetary policy is needed,” Jordan told CNBC.

The dollar hit an intraday high against the Swiss franc after his comments, hitting 0.9211 at 9:30 a.m. London time, after trading near 0.9164 earlier in the day.


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