Thomas Jordan: Monetary policy under new constraints - challenges for the Swiss National Bank

Contribution by Mr Thomas Jordan, Chairman of the Governing Board of the Swiss National Bank, to the panel "The outlook for policy post-pandemic", at the "Reassessing Constraints on the Economy and Policy" economic policy symposium sponsored by the Federal Reserve Bank of Kansas City, Jackson Hole, Wyoming, 27 August 2022.

The views expressed in this speech are those of the speaker and not the view of the BIS.

This year's Jackson Hole symposium seeks to reassess the constraints on the economy following the coronavirus pandemic and Russia's attack on Ukraine, with this panel focusing on the monetary policy outlook in particular. The pandemic and the war in Ukraine have fundamentally changed the constraints on conducting monetary policy. In the past, central banks have been constrained by the effective lower bound on interest rates, but at present it is the strong rise in inflation that poses the major challenge. Over the longer term, structural developments such as the decarbonisation of the economy, the high levels of sovereign debt worldwide and potential deglobalisation could shape the economic constraints and lead to heightened inflationary pressure.

I begin by looking back at the challenges central banks, and in particular the Swiss National Bank, have had to contend with since the global financial crisis. I will go on to highlight the developments since the pandemic and the outbreak of the war. The second half of my contribution will address in particular why an appropriately defined range for price stability and a narrow mandate are key factors in being able to conduct effective monetary policy over the longer term in an ever-changing environment. Here I will draw especially on the SNB's experience, taking the Swiss perspective of a small open economy with an important currency.