Thomas Jordan reflects on his 25-year influence in Swiss monetary policy during a lecture at the Swiss Institute for Foreign Research. He critiques recent tariff strategies, advocates for the strength of currencies as a sign of economic health, and emphasizes the need for diverse economic perspectives in decision-making. Jordan defends the SNB’s flexible inflation target while opposing higher targets and expanding central bank mandates to include social issues. He underscores the importance of central bank independence and the need for transparency and humility in policy-making.
Thomas Jordan Reflects on His Legacy in Swiss Monetary Policy
For more than 25 years, Thomas Jordan has played a pivotal role in shaping Swiss monetary policy, including an impressive 17 years on the board of the Swiss National Bank (SNB). As he steps down at the end of September 2024, Jordan took the opportunity to reflect on his extensive career during a public lecture at the Swiss Institute for Foreign Research (Siaf) at the University of Zurich, with his successor Martin Schlegel in attendance.
A Strong Currency: A Sign of Economic Health
During the lecture, many attendees were curious about Jordan’s views on the recent tariff policies introduced by Donald Trump and the implications of weakening the dollar. Although he maintained a level of restraint, Jordan revealed his thoughts as a private citizen, asserting that relying on tariffs is a misguided strategy for economic strength. He emphasized, “A strong currency is not bad; rather, it is a reflection of a strong economy,” while advocating for the free convertibility of currencies. Jordan warned that undermining the dollar’s status could have dire repercussions for the global financial system, yet expressed confidence that U.S. policymakers understand these complexities.
In his address, Jordan highlighted that monetary policy transcends mere technicality. Decisions are often made amidst uncertainty and must be approached with foresight, as their effects may not be immediate. He stressed the importance of combining rigorous economic analysis with a broader perspective and intuitive judgment, stating, “Monetary policy is, as many observers have repeatedly noted, to a certain degree an art.” This artistic aspect involves accurately gauging the capabilities and limitations of monetary policy in any given situation.
Jordan also critiqued the growing expectation for central banks to prepare markets for decisions almost in advance, emphasizing the necessity of involving a diverse group of economists in the decision-making process. According to him, a robust risk management strategy should accompany thorough economic assessments, ensuring that decisions cater to various potential future scenarios and can be adjusted if forecasts change. He believes in reaching a consensus as much as possible during decision-making, which has proven beneficial for the SNB.
Reflecting on the SNB’s effective maintenance of price stability throughout various crises, Jordan noted the importance of its clearly defined mandate. He explained that Switzerland’s flexible inflation target of 0 to 2 percent allows for more pragmatic responses compared to more rigid targets set by other central banks. Jordan also expressed skepticism regarding proposals from academia advocating for higher inflation targets, arguing that such notions are unrealistic and could divert central banks from their primary responsibilities.
Moreover, he cautioned against extending central banks’ mandates to include goals related to climate change, sustainability, or social inclusion. Jordan articulated that the independence of central banks is crucial for resisting pressures from various interest groups and political entities. He stressed the need for ongoing advocacy for this independence, as it is legally granted and could be compromised at any moment. In conclusion, he asserted that maintaining a focus on price stability, exercising humility, avoiding economic fine-tuning, and ensuring transparency are vital to safeguarding this independence. As he passes the torch to the next generation, Jordan’s principles and insights will undoubtedly influence the future of Swiss monetary policy.