By John Revill BERN, April 24 (Reuters) - The Middle East conflict will lead to slower economic growth and higher inflation in Switzerland, but the Swiss National Bank has unrestricted scope to target
Swiss National Bank Chairman: Middle East Conflict to Impact Economy, Inflation
Impact of Middle East Conflict on Swiss Economy and SNB Policy
By John Revill
Economic Uncertainty and Inflation Outlook
BERN, April 24 (Reuters) - The Middle East conflict will lead to slower economic growth and higher inflation in Switzerland, but the Swiss National Bank has unrestricted scope to target price stability, SNB Chairman Martin Schlegel said on Friday.
The war had made the global economic situation "very uncertain", Schlegel told the SNB's annual general meeting.
The outlook for inflation and the economy in Switzerland had also become much more unclear, he added.
Short-term and Medium-term Growth Projections
"Growth could be rather subdued in the short term, even though we expect an upturn to some extent in the medium term. In the coming quarters, higher energy prices will lift inflation further in Switzerland," Schlegel said in Bern.
Swiss Inflation and Currency Dynamics
Swiss inflation has recently tended towards the bottom end of the SNB's 0-2% target range, which it calls price stability.
Meanwhile upward pressure on the Swiss franc has increased, with investors seeking safe havens, which threatened to push inflation lower by making imports cheaper, Schlegel said.
SNB Policy Response and Foreign Exchange Interventions
The SNB has kept its interest rate locked at 0%, the lowest among major central banks, and last month said it had increased its readiness to intervene in foreign currency markets to cap a too rapid or excessive rise in the franc.
Economists at UBS estimate the SNB increased its foreign policy purchases to 2.5 billion francs in March, a big increase from recent months, but still modest compared with interventions during the Covid pandemic in 2020.
Commitment to Price Stability
The SNB would not hesitate to act to keep inflation on target, Schlegel said, and adjust monetary policy if necessary.
"We have unrestricted room for manoeuvre with regard to the SNB policy rate and foreign exchange market interventions," he said, reiterating that the SNB was more willing to buy foreign currencies to weaken the franc.
(Reporting by John Revill, editing by Dave Graham)
