Central banks around the world have spent the past two years struggling to find a solution to the generationally high levels of inflation, rising interest rates and pushing economies to the brink of recession. But according to the man behind the Swiss economy that curbed inflation a year ago, the answer may just be to bring a little boredom to the job.
Switzerland has managed to keep inflation under control, well ahead of economies such as the US, EU and UK, and has maintained its 2% target for the past 12 months.
Swiss National Bank (SNB) Governor Thomas Jordan said boredom and “not being distracted by other activities” could be the reason the Swiss economy has managed to avoid the worst overall inflation level of the past 40 years ahead of its peers.
Switzerland’s record over the past few years speaks for itself.
At worst, Swiss inflation peaked at 3.3%, a fraction of the double-digit price increases experienced in other economies. Inflation in the US was well above target, falling to 3% in June, while in the EU it was 2.5% in June.
“I think the people in charge of the national bank should focus on their jobs. They should do their jobs and not be distracted by other activities,” Jordan told Bieler Tagblatt.
“I’d rather be called boring or stubborn than have people say I’m pursuing the wrong monetary policy.”
Jordan, who just finished his 12-year tenure, said the central bank job was not boring, arguing the perception was a “cliché”.
But Jordan may find solace in such dullness compared to the noise surrounding inflation, interest rates and broader fiscal policy across its borders.
Inflation continues
Switzerland has developed an unfair reputation for efficiency that bores onlookers.
In fact, Jordan has barely made an appearance in the international press during his 12 years in office, despite the enormous economic and geopolitical turmoil that has swept other regions and drawn the attention of its peers.
Former ECB President Mario Draghi took up his role amid a major debt crisis in the euro zone that arose as a result of the 2007 global financial crisis.
Canadian Mark Carney, a former Bank of England governor, has also been in the news steadily as Britain navigates the aftermath of its 2016 referendum to leave the EU.
Earlier this year, even the governor of Sweden’s central bank, the Riksbank, made headlines when his organization cut interest rates unusually early, ahead of the EU and the United States.
Switzerland is not part of the euro zone and is therefore not bound by the ECB’s interest rate setting, which must take into account inflationary conditions in all 27 member countries.
Swiss Franc too thank you In recent years, it has helped lower the cost of imported goods and services, a major factor in driving inflation elsewhere.
This appreciation has had a significant impact on fuel imports, which have seen their prices soar since Russia’s invasion of Ukraine, and are traded primarily in USD and EUR currencies. Switzerland’s low dependence on fossil fuels and its use of hydro and nuclear energy have made the burden even greater.
In Britain, another non-eurozone member, inflation has remained below the 2% target for the past several months, leading to growing calls for a rate cut.
However, there are still expectations that inflation will rise again in the second half of the year.
Commodity prices, including fuel and agricultural produce, soared in May, putting pressure on corporate spending, but have since fallen again.
ECB President Christine Lagarde said some of these pressures were related to tight labor markets and wage increases trying to offset previously high levels of inflation.
As SNB Governor Jordan winds down his role with little fanfare, the pressure is likely to continue to drain his country’s “boring” economy.
