“We probably all underestimated the inflationary pressures in 2021,” Jordan told CNBC.
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Monetary policy was “too expansionary” in previous years and the current rise in consumer prices has yet to be brought under control, Swiss National Bank Chairman Thomas Jordan said on Friday.
“Probably with the benefit of hindsight, monetary policy across the board was a little too expansionary,”[ads1]; Jordan said when asked by CNBC’s Joumanna Bercetche if the current economic situation would have been different if the central banking community had responded more quickly to signs of inflation.
“We probably all underestimated the inflationary pressures in 2021,” Jordan told CNBC on 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 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 return to price stability will be absolutely critical,” he added.
Tighter monetary policy “is necessary”
Jordan emphasized 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 will come with a limited impact on the real economy, but this is difficult to predict,” he said.
Changed wage expectations and the companies’ response to rising inflation show that it will be difficult to bring inflation down, and that even tighter monetary policy may be on the cards in Europe and the US, according to the central bank governor.
“Inflation remains at a level that tighter monetary policy is necessary,” Jordan told CNBC.
The dollar rose to a higher 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.