Why Taylor Swift Doesn’t Make It into the SNB’s Blue Book
The National Bank bases its interest rate decision not only on economic models but also considers the results of discussions with companies. For example, the CS takeover alleviates the shortage of IT specialists. However, the bank is missing in the corporate banking sector.
Almost overshadowed by the widely covered staff transition in the directorate – Martin Schlegel replaces the outgoing President Thomas Jordan, and Petra Tschudin newly joins the monetary policy decision-making body – the Swiss National Bank (SNB) has published its «Blue Book,» a report summarizing the results from discussions conducted by the SNB's regional economic delegates with company management.
Blue Book is a rather humorous term that refers to the color of the (SNB-blue) cover and is modeled after the name of the Beige Book, a similarly significant publication by the US Federal Reserve.
Key Metric for Monetary Policy Assessment
Officially, the report is called «Economic Signals» and is part of the quarterly bulletin that the SNB publishes a few days after its interest rate decision (the latest dated last Thursday). The quarterly bulletin also contains the monetary policy report, which details the basis for the SNB's decision. It includes a description of international and Swiss economic developments, prices (from the perspective of consumers and wholesale), and inflation expectations. The chapter «monetary development» examines the course of interest rates, stock prices, and exchange rates.
Central banks must estimate future economic and inflation developments to steer monetary policy correctly. For this, they use sophisticated economic models. However, these models often prove to be not very informative or accurate in crises; for instance, practically all models underestimated the impact of the inflation surge after the Corona crisis. Reports like the Blue Book, which reflect the mood in the real economy, provide a valuable complement to these theory-heavy decision-making bases.
Traces of the CS Takeover
The latest Blue Book incorporates the results of 242 discussions that SNB delegates conducted with companies from April 16 to June 4. Some statements are also interesting from a financial sector perspective. For example, the delegates note that service companies' offices are underutilized due to the still high proportion of home office work. Apparently, many companies' back-to-office campaigns have yet to bear much fruit.
There may be a turnaround in the skilled labor shortage. Although specialized IT specialists (cybersecurity, artificial intelligence) are still in demand, recruitment difficulties have decreased. Some companies have speculated to the SNB that the integration of Credit Suisse (CS) into UBS (and job cuts at international technology and pharmaceutical companies) has led to this easing.
Wage Dynamics Decline, Inflation Expectations Stable
The CS takeover also leaves traces elsewhere. «In connection with the financing of larger and international projects, some companies regret that CS, as a significant bank in corporate banking, is disappearing.» Nevertheless, the overall business development in the financial sector remains robust, although competition for customer deposits dampens profits in the otherwise lucrative interest business. On the other hand, business dynamics in the ICT sector have slowed somewhat after some very good years, according to SNB delegates.
Last week, the SNB lowered the key interest rate by a quarter percentage point and probably felt reinforced by its Blue Book. It shows that companies, due to the decreased inflation and easing in the labor market, expect wages to rise less this year than in 2023. And long-term inflation expectations are well below the critical 2 percent mark for price stability (measured as the average annual inflation rate of the national consumer price index).
Fed Pays More Attention to Taylor Swift
It is unfortunate that the «Economic Signals,» unlike its counterpart Beige Book, do not contain information on developments in individual economic regions. Thus, the two concerts that Taylor Swift will give in Zurich on July 9 and 10 are unlikely to be reflected in the next Blue Book.
The pop star managed to get mentioned in the section of the July Beige Book by the Federal Reserve of Philadelphia last year because her concert in Philadelphia led to a peak in hotel bookings.