IMF Staff Country Reports

Switzerland: Selected Issues

June 24, 2024

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Format: Chicago

International Monetary Fund. European Dept. "Switzerland: Selected Issues", IMF Staff Country Reports 2024, 180 (2024), accessed November 21, 2024, https://doi.org/10.5089/9798400279164.002

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Summary

This Selected Issue Paper studies the relationship between monetary policy, financial conditions, and real activity during the current monetary policy-tightening episode in Switzerland. After a review of various channels through which monetary policy changes affect financial conditions, the paper shows that the transmission of policy rates to market rates has been swift and that the exchange rate is an important channel. The response of real activity to tightening financial conditions has remained broadly in line with past tightening episodes. The interest rate increase has influenced cash flows for households due to higher mortgage interest expenses. Higher interest rates also lead to higher rental cost for non-homeowners. Policy rate adjustments affect the average interest rates of mortgages and thus the mortgage reference interest rate, which is a factor for rent adjustments by Swiss regulation. Monetary tightening has contributed to a slowdown of private credit and house-price growth. Growth of mortgage loans, which represent 85 percent of bank lending, moderated to 2.4 percent in 2023 from 3.5 percent in 2022.

Subject: Central bank policy rate, Financial institutions, Financial services, Inflation, Labor, Labor markets, Mortgages, Prices, Real estate prices

Keywords: B. Beveridge Curve dynamics, Central bank policy rate, Europe, Global, Inflation, Labor markets, Market valuation, Monetary policy transmission, Mortgage price, Mortgages, Real estate price development, Real estate prices

Publication Details

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