In hindsight, monetary policy everywhere was too expansionary: Swiss central bank chief


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

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Monetary policy was “too expansionary” in previous years and the current surge in consumer prices has not yet been brought under control, the chairman of the Swiss National Bank Thomas Jordan said Friday.

“Probably with the benefit of hindsight monetary policy was all over the place a little bit too expansionary,” Jordan said when asked by CNBC’s Joumanna Bercetche if the current economic situation would be different if the central banking community had reacted quicker to signs of inflation.

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

While inflation will likely come down in 2023, having hit a three-decade high in Switzerland in August and a record high in the euro zone in October, Jordan said that the jump from 4% to 2% will be tough.

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

Tighter monetary policy ‘is necessary’

Jordan highlighted that price stability should be the “absolute priority” for central banks, but he was unable to say whether a recession was on the horizon.

“Hopefully it comes with limited impact on the real economy but this is difficult to predict,” he said.

Changing wage expectations and companies’ responses to rising inflation show that it will be difficult to bring inflation down, and that even tighter monetary policy may be in the cards in Europe and the U.S., according to the central bank chairman.

“Inflation is still at a level that tighter monetary policy is necessary,” Jordan told CNBC.

The dollar rose to a session high against the Swiss franc after his comments, hitting 0.9211 at 9.30 a.m. London time after trading near 0.9164 earlier in the day.