After the European Central Bank, the US Federal Reserve could also raise its key interest rate this week. Prices will not fall simply because of the hope of cheaper oil.
June 16, 2026, 09:27June 16, 2026, 09:27
No more experiments: ECB President Christine Lagarde at the media conference in Frankfurt last week.Image: keystone
Maybe this time the peace agreement between the USA and Iran will work. After all, a corresponding declaration of intent is to be presented and signed for the first time in written form in Geneva on Friday. But three and a half months after the first bombs fell on Tehran, the markets have created facts that cannot be quickly erased with a little paper and ink.
In many countries, inflation has returned to a level that central banks can no longer reconcile with their mandate to maintain price stability. According to Eurostat estimates, overall inflation in the euro area rose to 3.2 percent in May. This is the highest level since September 2023 and is well above the 2 percent target that the European Central Bank (ECB) is aiming for.
Avoid old mistakes
As was the case five years ago, this time it is primarily energy prices that are causing the rise in inflation. Ignore and wait was the strategy with which the ECB, under the leadership of Christine Lagarde, responded to the increase in energy prices in the summer of 2021. That went terribly wrong. In autumn 2022, inflation in the euro zone climbed to over 10 percent and the ECB was forced to increase the key interest rate from 0 percent in July 2022 to 4 percent in September 2023.
As a result, Germany, Switzerland’s most important trading partner, among others, had to postpone hopes of a strong recovery in economic growth, which had been depressed for years, until an indefinite future.
And our neighbors do not expect a key interest rate cut any time soon, even if the guns remain silent in the Middle East for a longer period of time. “Even if the Strait of Hormuz becomes navigable again soon, it will take months until the oil supply returns to normal,” explains Bundesbank President Joachim Nagel.
Oil supply is unlikely to recover as quickly as ships travel through the Strait of Hormuz.Image: AP NY
After the ECB’s key interest rate increase on Thursday, many important euro keepers made it publicly known that the rise in energy prices in recent months had already eaten deeper into inflation expectations. This could force the ECB to raise key interest rates again in July or September.
Bitter pill for Trump
For the US Federal Reserve, where new boss Kevin Warsh will publicly represent an interest rate decision for the first time on Wednesday, the situation is different, but not easier. The Fed cut the key interest rate in December to the range of 3.5 percent to 3.75 percent and has not changed it since then. Until a few weeks ago, many observers in the USA were expecting further interest rate cuts this year. This is also the express expectation of President Donald Trump, who repeatedly and violently criticized Warsh’s predecessor Jerome Powell.
But now Warsh also has to think about how he can reduce inflation to 4.2 percent so that the widespread feeling among many American low-wage and pension earners that they are losing more and more purchasing power and becoming poorer does not worsen.
Only recently appointed by US President Donald Trump as head of the central bank – the new Fed chief Kevin Warsh.Image: keystone
The best recipe for this would be to raise key interest rates, which is what many economists also expect. But interest rate increases run counter to Trump’s efforts to keep the economy on a growth path with immense investment stimulus. Waiting for lower energy prices is not an option for Warsh, especially since the main driver of US inflation is strong domestic demand.
Privileged National Bank
Fortunately, the Swiss National Bank (SNB), which is expected to announce a continuation of its zero interest rate policy on Thursday, does not have such a dilemma. Inflation in Switzerland has also risen since the beginning of the year from 0.1 percent to 0.6 percent in May. But with an inflation target of 0 to 2 percent, the SNB is far from being forced to act.
However, rising interest rates in Europe and the USA could cause a significant weakening of the Swiss franc in the next few months, which would in turn drive up inflation here through higher import prices. However, the National Bank has the necessary instruments to strengthen the franc again if necessary. And above all, it has the privilege of being able to use its own currency to control developments (energy prices) quite directly, over which it actually has no influence whatsoever. (schweiztoday.ch)