The Swiss National Bank (SNB) has been extremely reluctant to increase interest rates, presumably because its currency has been excessively strong. Meanwhile, its forecast for near-term inflation has increased, and the economy has performed reasonably well despite the strong currency (although tourism and exports have recently suffered a bit).
The pressure to increase rates may have ratcheted up a notch with Anne Heritier Lachat, the chairwoman of the Swiss Financial Market Supervisory Authority (FINMA), complaining about the potential for housing bubbles in Switzerland. Lachat cited in an interview that all the key ingredients for a bubble exist: low rates, demand exceeding supply, and the assumption that housing has once again become a safe investment. The direction of SNB monetary policy could get a lot more exciting from here…