Central banks worldwide have struggled over the last two years to find solutions to generationally high levels of inflation, hiking interest rates, and pushing their economies to the brink of recession.
But according to the man behind a Swiss economy that reined in inflation a year ago, the answer could just come down to bringing a bit of boredom to the job.
Switzerland tamed its inflation beast well ahead of economies like the U.S., the EU, and the U.K., staying around its targeted 2% for the last 12 months.
Swiss National Bank (SNB) chairman Thomas Jordan suggested that boredom and not getting “noticed with other activities” could be the reason the country’s economy has managed to escape the worst general levels of inflation in four decades before its competitors.
Switzerland’s record over the past few years speaks for itself.
At its worst, Swiss inflation peaked at 3.3%, a fraction of the double-digit price rises that plagued other economies. Inflation in the U.S. remains stubbornly above its target, falling to 3% in June, while in the EU it was at 2.5% in June.
“I believe that the people who are responsible for the national bank should concentrate on their job. They must fulfill their mandate and not get themselves noticed with other activities,” Jordan told Bieler Tagblatt.
“It’s better to be called boring or stubborn than for people to say I’m pursuing the wrong monetary policy.”
Soon after ending his 12-year tenure, Jordan caveated that he didn’t think his central bank's work was boring, arguing that perception was a “cliche.”
Still, compared with the noise around inflation, interest rates, and broader fiscal policy outside his borders, Jordan might find solace in that perceived boredom.
Inflation carries on
Switzerland, perhaps unfairly, has built a reputation for efficiency that lends itself to perceptions of boredom from onlookers.
Indeed, Jordan has seldom appeared in the international press during his 12 years in his role, despite massive economic and geopolitical turbulence that has thrust his peers in other regions into the spotlight.
Former ECB president Mario Draghi was thrust into his role in the midst of a major debt crisis in the Eurozone following the global financial crash of 2007.
Former Bank of England chief, Canadian Mark Carney, was likewise regularly in the news as he navigated the fallout from the U.K.’s vote to leave the EU in 2016.
Earlier this year, even the boss of Sweden’s Central Bank, the Riksbank, made headlines when his organization moved to get the jump on the EU and the U.S. with a rare early interest rate cut.
Switzerland isn’t part of the Eurozone, meaning it isn’t tied to the European Central Bank’s interest rate setting, which has to consider the inflationary environment in all its 27 member states.
The Swiss Franc has also appreciated in the last couple of years, helping reduce the cost of imported goods and services, which is a big driver of inflation elsewhere.
This appreciation was significant for fuel imports, which soared in price following Russia’s invasion of Ukraine and are predominantly traded in the USD and EUR currencies. Switzerland’s low levels of reliance on fossil fuels, instead using hydropower and nuclear energy, further lifted its burden.
In the U.K., another non-Eurozone member, inflation has stayed around the 2% target for the last couple of months, increasing calls for interest rate cuts.
However, there is still an expectation that inflation could tick up again in the second half of the year.
Commodity prices, such as fuel and agricultural products, shot up in May, putting pressure on businesses’ input costs, but they have since fallen again.
ECB chief Christine Lagarde has said some of the pressure has been linked to a tight labor market and rising wages meant to offset previously high inflation levels.
As the SNB chief Jordan departs his role to suitably little fanfare, those pressures seem set to continue to escape his country’s “boring” economy.
