Swiss National Bank Vice Chairman hints at further rate hikes ahead

WINTERTHUR, Switzerland (Reuters) -Swiss inflation may be low compared to other countries but is still too high, Swiss National Bank Vice Chairman Martin Schlegel said on Wednesday, hinting at possible further interest rates ahead.

"It is clearly above the level we associate with price stability," Schlegel told an event in Winterthur. "We cannot rule out further interest rate increases."

Swiss inflation dipped to 2.9% in March from 3.4% in February, high by Swiss standards and above the SNB's target for inflation at 0-2% - which it defines as price stability.

The SNB has responded by hiking interest rates at each of its last four monetary policy meetings, including increasing rates by 50 basis points to 1.5% last month.

The central bank currently forecasts a gradual decline in Swiss inflation this year to 2.6% and then 2% in both 2024 and 2025.

Still, Schlegel warned against complacency.

"Price stability has the highest priority," he said. "Although we expect inflation to decline, it is too early to sound the all-clear."

His comments echo his colleague, SNB Chairman Thomas Jordan, who said last week the central bank could have to raise interest rates once more.

Schlegel also acknowledged the rise of property prices in Switzerland, buoyed by post-COVID-19 demand as people sought bigger homes and an increase in the population.

There was a risk of a correction in the property market, he said, especially as price increases outpaced fundamental factors like wages increases or rents.

There were also more risks as more people had taken on home loans linked to market interest rates, which have become more expensive in recent months.

Still, the country's banks were well-equipped to deal with any downturn in house prices, Schlegel said.

(Reporting by John Revill, Editing by William Maclean and Deepa Babington)