Swiss inflation unexpectedly slows, backs case for SNB pause
SWISS inflation unexpectedly slowed to a two-year low, adding to the case for Swiss National Bank (SNB) officials to keep borrowing costs steady when they meet next week.
Consumer prices rose 1.4 per cent in November from a year earlier, the weakest since October 2021. That was lower than predicted by any economist in a Bloomberg survey, which foresaw no change from 1.7 per cent. The drop was driven by lower costs for hotels, package holidays, fuel, and fruit and vegetables.
The so-called core gauge, which strips out volatile elements such as energy and food, also decelerated to 1.4 per cent, the Swiss statistics office said on Monday (Dec 4).
With Switzerland’s inflation rate keeping within the central bank’s target range of between 0 per cent and 2 per cent, the SNB paused hiking in September. Officials led by its president, Thomas Jordan, have been careful to stress that more tightening might be required.
“We can’t yet declare that inflation has been completely defeated,” Jordan said in an interview with NZZ newspaper late last month. “There is great uncertainty about future developments.”
The SNB predicts that inflation will breach the target range all next year, driven by higher costs of electricity, rents and public transport, combined with a boost in value-added tax. Power prices alone are set to rise an average 18 per cent in January.
Still, Swiss consumer price growth remains lower than many advanced economies, showcasing how the country’s strong currency has sheltered it from the ravages of inflation elsewhere.
Euro-area data last week revealed that price growth dropped to 2.4 per cent there. Based on the European Union’s harmonised measure, Swiss inflation was 1.6 per cent in November.
Switzerland’s economy has also fared more comfortably than its neighbours. Gross domestic product increased 0.3 per cent in the third quarter, and the Organisation for Economic Co-operation and Development predicts that it will expand 0.8 per cent this year. That is ahead of the 0.6 per cent forecast for the euro area, which contracted in the three months till September. BLOOMBERG
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