New SNB Chairman considers geopolitical risks to be very high
Published: Tuesday, Oct 1st 2024, 11:40
Updated At: Wednesday, Oct 2nd 2024, 01:59
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On Tuesday evening, Martin Schlegel made his first public appearance in Ticino in his new role as Chairman of the Swiss National Bank (SNB). He emphasized that further negative interest rates would be undesirable. He is concerned about geopolitics.
"The geopolitical risks are very high," said Schlegel during his visit to Bellinzona. The SNB therefore expects "subdued growth" in the coming quarters.
Overall, the SNB expects GDP growth of 1 percent in the current year. This figure is lower than the long-term average, explained Schlegel, who greeted the audience in Italian before switching to German.
As Christian Vitta, Head of the Ticino Department of Finance and Economic Affairs, pointed out in his introduction, Martin Schlegel had already been invited to Ticino before his appointment as the new SNB President. The fact that he is now here in his new role fills the entire canton of Ticino with "great pride".
Weak global momentum
Following a statement on the renewed key interest rate cut last Thursday, the new SNB Chairman addressed the current economic situation and the subdued GDP growth. He attributed the latter to the "uneven development of the industrial and service sectors".
Industry has been performing weakly for several quarters, which is due to "weak global momentum". In contrast, value creation in the service sector in Switzerland has increased.
He therefore expects economic growth to remain subdued and the Swiss franc to remain strong in the coming quarters. It cannot be ruled out that inflation abroad will remain high.
"Well driven with a strong franc"
In response to the comment from the audience that export-oriented sectors were concerned and to the question as to why the SNB had not lowered the key interest rate by 0.5 percent, Schlegel said that he had the greatest respect for entrepreneurs who were active in the export sector.
He understands that a strong franc is "troublesome" in the short term, but in the long term it has a positive effect because it means you have to remain competitive. "Switzerland has done well with the strong franc," summarized the new SNB Chairman.
"We can't rule anything out"
Amalia Mirante, cantonal councillor for the fledgling "Avanti con Ticino & Lavoro" party and economist, wanted to know whether a halt to the interest rate cuts was conceivable. "We can't rule out any measures," replied Martin Schlegel.
He knows that nobody likes negative interest rates, not even the SNB. However, the measure was necessary in the past in order to keep the attractiveness of the Swiss franc low.
Another question concerned possible future profit distributions to the cantons. Schlegel explained in response to a question from Ticino National Councillor Simone Gianini (FDP) that the SNB's priority was to ensure that it had sufficient equity capital. The SNB had taken on a large currency risk and a profit distribution was still in the stars.
When asked about the upcoming elections in the USA as a potential risk for the Swiss economy, the newly appointed Chairman of the Swiss National Bank was evasive. "The SNB wants to stay out of political discussions, at home anyway, but also abroad," he said.
In principle, Switzerland has an interest in open markets and lively trade. As the Swiss franc is considered a safe haven, it is in Switzerland's interest that there is not much uncertainty and little turbulence on the financial markets.
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