“Probably we all underestimated inflationary pressures in 2021,” Jordan told CNBC.
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Monetary policy has been “too expansionary” in recent years and the current rise in consumer prices has not yet been brought under control, said the President of the Swiss National Bank, Thomas Jordan, on Friday.
“Probably with hindsight, monetary policy has been a bit too accommodative everywhere,” Jordan said when asked by CNBC’s Joumanna Bercetche if the current economic picture would have been different if the central banking community had reacted more quickly to signs of inflation.
“Probably we all underestimated inflationary pressures in 2021,” Jordan told CNBC at a panel at the World Economic Forum in Davos.
While inflation is likely to ease 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.
“Core inflation isn’t coming down fast,” Jordan said. “It will be much harder to get inflation from 4% to 2% – so central banks’ commitment to returning 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 couldn’t say if a recession was on the horizon.
“Hopefully it will have a limited impact on the real economy, but that’s hard to predict,” he said.
Changing wage expectations and corporate responses to rising inflation show that inflation will be difficult to bring down and even tighter monetary policies are on the horizon in Europe and the US, the central bank governor said.
“Inflation is still so high that tighter monetary policy is needed,” Jordan told CNBC.
The dollar surged to session highs against the Swiss franc following his comments, hitting 0.9211 by 9.30am London time after trading near 0.9164 earlier in the day.