Surprisingly low inflation gives SNB more leeway
Published: Thursday, Apr 4th 2024, 11:00
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Surprisingly, inflation in Switzerland fell again in March. Further interest rate cuts by the Swiss National Bank (SNB) have thus become even more likely, according to economists.
Specifically, inflation fell to 1.0% in the month under review from 1.2% in February, as reported by the Federal Statistical Office (FSO) on Thursday. This means that Swiss consumer goods were 1.0% more expensive in March than in the same month last year. The last time inflation was lower was in September 2021.
The decline is a surprise. Economists surveyed by the news agency AWP had previously estimated values between 1.2 and 1.5 percent.
Initial reactions explained the deviation with surprisingly low core inflation for goods and negative inflation in the "fresh and seasonal products" category. All in all, there is a broad dynamic of falling prices, according to the Geneva-based bank Pictet.
Inflation had already fallen in January and February. Inflation in Switzerland peaked at 3.5% in the summer of 2022. In June 2023, it then fell below the 2% mark for the first time since January 2022.
Core inflation also declining
Core inflation, which excludes volatile energy and fuel prices, also fell in March. It fell from 1.1 percent to 1.0 percent.
Among the individual product groups, residential rents stand out, having risen by 2.8% year-on-year. Oil products, on the other hand, have become cheaper.
At the current level, inflation in Germany remains moderate, even in comparison with other countries. In the eurozone, for example, it stood at 2.4 percent in March.
More leeway for SNB
All in all, price pressure in Switzerland is "very relaxed", concludes Raiffeisen chief economist Fredy Hasenmaile. Some economists speculate that current inflation is probably also below the SNB's forecasts.
According to various experts, this increases their scope to lower the key interest rate further after the surprise cut in mid-March. At that time, it lowered the interest rate to 1.5 percent from 1.75 percent due to falling inflation.
"Further interest rate cuts by the SNB in June and September are as good as certain," says Safra Sarasin economist Karsten Junius. UBS expert Maxime Botteron also sees the latest inflation figures as confirmation of his forecast "that the SNB will make two more rate cuts this year in June and September in order to reach a rate of 1.00 percent".
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