The International Monetary Fund said the Swiss National Bank should soon begin to “normalize its monetary policy” after maintaining the world’s lowest interest rate for the better part of the past decade.
“After a long period of very accommodative monetary policy — a policy rate of -0.75% since 2015 — the time may be approaching to normalize monetary policy,” the IMF said Wednesday during its annual review of Swiss economic developments.
The IMF also urged Swiss officials to closely monitor risks related to the war in Ukraine, higher inflation and rising real estate prices.
“The pickup of inflation is expected to be temporary at this time, with inflation returning to the SNB’s 0–2% price stability band in the first half of 2023,” according to the report.
The IMF said Switzerland should be able to mitigate higher inflation via the appreciation of the Swiss franc or policy rate adjustments if needed.
“Inflation gaps versus the euro area and the U.S. suggest possible room for nominal franc appreciation to ease inflation pressures,” the report said.
The IMF backed Switzerland’s reactivation of the sectoral countercyclical capital buffer and said further measures may be needed to counter address real estate prices.
Th IMF commended Switzerland’s strong recovery from the pandemic, which it attributed to “sound, supportive and agile domestic policies.”
