Swiss inflation reaches one-year low

Schweizer Inflation erreicht ein Jahrestief

Di., Mai 16th 2023

As consumer prices stalled in the month of April 2023, the annual inflation rate in Switzerland eased to 2.6% reaching a one-year low.

The stability of the Swiss franc is one of the reasons the country has been able to stave off high inflation.

Switzerland has avoided much of the inflation that has recently impacted Europe and the rest of the world.

Swiss inflation peaked at a 29-year high of 3.5% in August 2022. While high by Swiss standards, it is well below the inflation levels of other advanced economies, like the U.S. (9.1%), the U.K. (11.1%), and the Euro zone (10.6%).

WHY IS SWISS INFLATION SO LOW?

This can be attributed to multiple factors, including:

A strong currency – the Swiss Franc is considered a “safe haven” for financial investments – which mitigates inflation on imports;
Low demand for fossil fuels due to a high component of hydro/nuclear power;
The highest share of regulated prices (30%) in Europe, including energy prices following nationalization;
High tariffs on certain agricultural imports supporting preferential pricing on domestically produced foods;
The Swiss economy’s high level of labor productivity (among the highest of the OECD countries); and
Switzerland’s central bank restraint on using quantitative easing to expand the money supply – since 2015, Switzerland’s money supply (M3) has expanded by 22%, compared to 77% in the U.S. and 52% in the Euro zone.

(Credit: Swiss Federal Statistical Office)

The Swiss National Bank raised its policy interest rate to 1.5% in March, expecting to achieve its targeted inflation level of 2% by 2024. The Swiss economy (GDP) grew by 2.1% in 2022 (flat in Q4) , and is expected to avoid a recession by growing 1.1% in 2023, and 1.5% in 2024.

Private consumption should see modest growth over the coming quarters, bolstered by a solid labor market and nominal wage increases.

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Schweizer Inflation erreicht ein Jahrestief

Schweizer Inflation erreicht ein Jahrestief

As consumer prices stalled in the month of April 2023, the annual inflation rate in Switzerland eased to 2.6% reaching a one-year low.

WHY IS SWISS INFLATION SO LOW?

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