Prices in Switzerland remain stable

Prices remain stable Keystone

Price pressure within Switzerland remains under control, although the latest figures for inflation in May have come in at the top end of expectations.

The latest figures have been released against a backdrop of falling unemployment and an economy in which growth is picking up. Despite coming in at the top end of expectations, they still show that retailers are relatively unwilling to pass on rises in the prices of raw materials to the consumer.

However, analysts feel that despite the current benign inflation picture, this could change over the remainder of the year. Most are forecasting that inflation could reach 2.0 per cent by December, as the expanding economy coupled with the higher cost of imports filters through to prices on the shop floor.

“The May inflation data was much higher than expected and we now expect core inflation to accelerate as the labour market continues to tighten,” said Andreas Huffert, economist at Warburg Dillon Reed.

This latest inflation data will also increase the pressure on the Swiss National Bank to increase interest rates at its next meeting in June.

“The SNB should be worried, as we see the Swiss franc slip against the Euro. There are now increasing chances of importing inflation,” warned Andreas Huffert. “The bank should go for a 25 basis point hike in interest rates at its next meeting,” he added.

Next month sees a change in the way inflation data will be compiled, with new indices taking much more account of oil and energy costs than it did previously.

by Tom O’Brien