© Reuters. FILE PHOTO: Swiss National Bank (SNB) Vice-Chairman Fritz Zurbruegg attends a news conference in Bern, Switzerland June 18, 2020. REUTERS/Arnd Wiegmann
By John Revill
ZURICH (Reuters) – The recent surge in inflation has been caused by temporary factors, Swiss National Bank Vice Chairman Fritz Zurbruegg said on Wednesday, although central banks must still pay attention and bring price rises under control.
“It is the assumption that these drivers are temporary,” Zurbruegg told a conference in Zurich, citing supply chain bottlenecks after the pandemic and higher fuel costs as causes for recent higher inflation readings.
“It is the achievement of central banks in recent decades to bring inflation under control,” Zurbruegg said, adding it was essential that central banks continued to do so.
Zurbruegg’s comments echoed those of SNB Chairman Thomas Jordan this month.
Zurbruegg on Wednesday repeated the SNB’s commitment to the goal of price stability, which it defines as price increases in the 0-2% range.
In March, Swiss consumer prices rose by 2.4% compared with a year earlier, its highest level in years.
Still, Swiss inflation remains much lower than other countries like Britain and the United States, triggering interest rate hikes by their central banks.
In contrast the SNB has stuck to its ultra-expansive monetary policy course, based on the world’s lowest interest rate and foreign currency interventions to ward off appreciation pressure on the Swiss franc.
Zurbruegg also raised concerns about rising property prices in Switzerland, where the market is over-valued by around 30%, according to SNB estimates.
Zurbruegg said he was concerned about the potential impact on financial stability if there was a sudden drop in the market, hurting banks that lend money to home owners.
“The vulnerability is increasing, the difference between prices and fundamentals has increased,” he told the event.
“But the resilience has also increased,” he said, adding a large majority of banks now had enough of a buffer to cope with a correction.
Swiss National Bank’s Zurbruegg says temporary factors drive inflation