Switzerland keeps stimulus amid inflation woes

Photo: EPA

The Swiss national bank (SNB) announced it would keep ultra low interest rates although pick-up of post-pandemic demand increases the inflation pressure, Reuters reported. The monetary policy of the bank is in line with the approach of the Swiss government to ease the impact of the slowdown of economy, caused by the Covid-19 lockdown.

Analysts have warned about raising inflation forecasts as the global economy recovers from last year's pandemic. The Swiss central bank decided to keep its policy rate locked at -0.75%. The central bank also kept the interest rate it charges commercial banks on some deposits they park overnight at -0.75%. The SNB said the franc remained highly valued. The currency has regained strength in recent weeks as other central banks kept their interest rates low. The SNB also followed the European Central Bank and the US Federal Reserve in raising its inflation forecasts. The Swiss central bank, which targets inflation in a range of 0% to 2%, now expects inflation of 0.4% in 2021, compared to its March forecast of 0.2%. Higher inflation is now expected in the next two years, with rates of 0.6% in both 2022 and 2023, up from its previous expectation of prices rising by 0.4% and 0.5%, respectively.

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