Swiss inflation eased by more than expected last month — a move that still may not be enough to stop the central bank from raising interest rates again in June.
(Bloomberg) — Swiss inflation eased by more than expected last month — a move that still may not be enough to stop the central bank from raising interest rates again in June.
Consumer prices increased 2.9% in March from a year ago, the Federal Statistics Office said Monday. That’s below the median estimate in a Bloomberg survey, which predicted a retreat to 3.2%.
The slowdown — the steepest decline in almost three years — was primarily due to energy and fruit costs, and some holiday accommodation.
“Looking at these numbers, the Swiss National Bank is still not done, but can take a breath,” said Karsten Junius, chief economist at Bank J Safra Sarasin Ltd. in Zurich. “A further interest-rate hike in June will come, but officials can now leave it at 25 basis points.”
While the central bank is still in tightening mode, Swiss inflation is the continent’s lowest. Based on the European Union’s harmonized gauge, consumer-price growth stood at 2.7% in March — less than half the pace in the surrounding euro area.
There was good news on underlying inflation, too. The gauge, which strips out volatile elements like energy and food, slowed to 2.2% after accelerating since October.
“The core reading shows that price pressures are significantly lower in Switzerland than in the rest of Europe,” Junius said. “It’s astonishing how different the development compared to the euro area can be.”
Still, the SNB sees headline inflation — which has exceeded its 2% ceiling for more than a year — staying at 2% or higher through 2025. Defying global market jitters in the wake of a government-brokered takeover of Credit Suisse Group AG by UBS Group AG, it pushed through another 50 basis-point rate hike two weeks ago.
EXPLAINER: How Switzerland Dodged the Worst of the Global Inflation Shock
With a very tight labor market, Switzerland runs a particular danger of rising prices pushing up wages. An SNB survey of more than 200 company representatives published last week showed that almost half of them described their staffing levels as too low for comfort.
The outlook for Swiss businesses remains subdued, however. The country’s purchasing managers’ index declined further below the threshold of 50 that separates growth from contraction, reaching 47 last month.
–With assistance from Joel Rinneby and Kristian Siedenburg.
(Updates with economist in fourth paragraph.)
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