Inflation rising again – experts not alarmed
Published: Monday, Jan 8th 2024, 12:20
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Inflation in Switzerland rose relatively sharply in December. However, experts do not expect an unchecked rise.
Specifically, inflation rose to 1.7 percent in the month under review from 1.4 percent in November, as reported by the Federal Statistical Office (FSO) on Monday. This means that Swiss consumer goods were 1.7% more expensive in December than in the same month last year.
This is the strongest increase for some time, after the recent clear downward trend. Since the multi-year high of 3.5% in the summer of 2022, inflation had been gradually falling - with a few exceptions.
Basic energy effect
According to economists, the current rise in annual inflation is primarily due to the so-called base effect in energy prices. Following a very sharp fall in the same month last year, these have once again contributed somewhat more to inflation, write the experts at Raiffeisen, for example.
Other reasons cited by economists for the rise in inflation include price increases in public transport, lower discounts after the Black Friday period and a general rise in prices in the service sector.
Over 2 percent in January?
And according to Swiss Life economist Marc Brütsch, inflation is likely to rise again this January. He expects the inflation rate to rise to 2.2 percent due to the electricity price increases, the rise in letter post rates and the VAT increase.
However, he emphasizes that this increase is of a temporary nature and thus agrees with the majority opinion of his profession. "Overall, there is no sign of a trend reversal in price momentum," says Alexander Koch from Raiffeisen. Apart from the usual volatility and the announced delayed administered price increases, the price picture in Switzerland remains "relaxed".
He expects inflation to average just 1.5% in 2024. In comparison: last year, average inflation was 2.1 percent, and in 2022 it was as high as 2.8 percent.
Scope for the SNB
The majority of forecasters are currently also predicting average inflation of less than 2% for 2024, which the Swiss National Bank (SNB) considers to be the upper limit for price stability.
This also includes UBS economist Alessandro Bee. He believes that inflation rates at the current level are likely for the first half of the year. "However, inflation is likely to fall in the second half of the year," he says.
However, the reason for this is not a positive one: the weak capacity utilization in the Swiss economy will probably put downward pressure on inflation. This will at least give the SNB room to cut interest rates again in order to support the economy. Specifically, the UBS man expects a first interest rate cut in June 2024, followed by two more in the second half of the year.
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