In retrospect, monetary policy everywhere was too expansive: the Swiss central bank chief

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

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Monetary policy has been “too expansive” in recent years and the current rise in consumer prices has not yet been brought under control, Swiss National Bank Chairman Thomas Jordan said Friday.

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

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

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

In retrospect, monetary policy was too accommodative, says the chairman of the Swiss central bank

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

Tighter monetary policy ‘is necessary’

Jordan stressed that price stability should be the “absolute priority” for central banks, but he could not say whether a recession was imminent.

“Hopefully it will have a limited impact on the real economy, but this is 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 in Europe and the US is on the horizon, said the central bank chairman.

“Inflation is still at levels that require tighter monetary policy,” Jordan told CNBC.

The dollar rose to a session high against the Swiss franc following his comments, reaching 0.9211 at 9:30am London time after trading near 0.9164 earlier in the day.

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