Credit Suisse: The risk of inflation in Switzerland and Europe is too low for the European Central Bank and Swiss National Bank to raise key interest rates

Credit Suisse: The risk of inflation in Switzerland and Europe is too low for the European Central Bank and Swiss National Bank to raise key interest rates

Credit Suisse publishes “Monitor Switzerland” for Q3 2021

(PRESS RELEASE) ZÜRICH, 15-Sep-2021 — /EuropaWire/ — Credit Suisse, a global wealth manager, investment bank and financial services firm, has announced the release of its quarterly “Monitor Switzerland” for Q3 2021.

The Swiss economy is continuing to recover despite the ongoing pandemic. Credit Suisse economists still expect economic growth of 3.5% this year. For 2022, they have revised their forecast upwards to 2.5% (previously 2%). The recent rise in inflation is likely to be temporary in most cases. Credit Suisse economists believe that the risk of inflation in Switzerland and Europe is too low for the European Central Bank and Swiss National Bank to raise key interest rates in the foreseeable future.

Thanks to the progress made on the vaccination front to date, coupled with the agility of the corporate sector, Credit Suisse economists expect the recovery taking place across large parts of the economy to continue for the foreseeable future. This is mainly due to the improvement in labor-market conditions, which are impacting positively on consumer sentiment. The latest forecasts show a gradual fall in the unemployment rate, which is expected to reach 2.5% toward the end of next year. In addition, the use of short-time working is decreasing. Meanwhile, a few restrictions in certain sectors, such as restaurants and leisure, are slowing their pace of recovery. In addition, a return to “normal” is an even more distant prospect for international tourism and major events.

Supply bottlenecks are constraining industry
The recovery of the economy as a whole will continue to be held back by supply bottlenecks in the industrial sector for the foreseeable future: Around 70% of Swiss industrial purchasing managers surveyed by Credit Suisse economists in collaboration with procure.ch currently report longer waiting times for supplies as well as rising purchase prices. Supply delays are likely to constrain the current recovery slightly. Owing to various supply constraints, the demand for goods will remain at an elevated level for longer than previously forecast: Credit Suisse economists now think it will be mid-2022 before the demand for goods levels out significantly due to the prospect of future market saturation and the potential running-down of inventory levels.

Minimal inflation risk in Switzerland and Europe
Current price rises, combined with high levels of government spending around the world and expansionary central bank monetary policy in industrialized nations, have sparked concerns about inflation. Empirical analysis produced by Credit Suisse economists nevertheless reveals that the link between money supply and inflation has weakened considerably. This puts the inflation risk posed by the current liquidity glut into perspective. The risk of a wage-price spiral beginning in Europe and Switzerland is likewise minimal, given excessive demand. This risk is slightly greater in the US, but nonetheless not excessively high based on firmly anchored inflation expectations. According to Credit Suisse economists, long-term inflation risks in Europe and Switzerland are so low that the European Central Bank and Swiss National Bank are unlikely to consider raising key interest rates in the foreseeable future and will therefore maintain their policy of negative rates.

“Monitor Switzerland” is published quarterly and is available online in English, German, and French at: www.credit-suisse.com/monitorswitzerland

The next issue will appear on December 14, 2021.

Media contacts:

Claude Maurer
Chief Economist Switzerland
Credit Suisse AG
+41 44 333 41 90
claude.maurer@credit-suisse.com

Maxime Botteron
Economist and Central Banks Specialist, Swiss Macro Analysis
Credit Suisse AG
+41 44 332 90 61
maxime.botteron@credit-suisse.com

Media Relations
Credit Suisse AG
+41 844 33 88 44
media.relations@credit-suisse.com

SOURCE: CREDIT SUISSE GROUP AG

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