Swiss Inflation Jumps More Than Expected to Four-Month High

(Bloomberg) — Swiss inflation jumped more than economists anticipated to a four-month high, giving officials grounds for caution as they determine whether to cut interest rates again.

Consumer prices rose 1.4% in April from a year earlier, the statistics office said on Thursday. That’s up from 1% in March and exceeds the 1.1% median prediction of economists surveyed by Bloomberg.

The Swiss franc jumped as much as 0.4% after the release to 0.9757 against the euro.

While much faster than that forecast, the reading does align with the 1.4% outcome that Swiss National Bank policymakers anticipate for the second quarter. They published that projection when they delivered the first rate cut of the cycle for one of the world’s 10 most-traded currency jurisdictions.

SNB President Thomas Jordan warned last week that new price shocks could hit “at any time” given heightened global uncertainty. He previously referred to the ongoing conflict in the Middle East  as the single greatest risk for monetary policy at the moment. 

The war is already likely to have fueled Swiss inflation, according to economists who pointed to the recent increase in oil prices and supply-chain disruptions especially around the Suez canal.

The so-called core gauge of inflation — which strips out volatile elements like energy and food — also accelerated in April, coming in at 1.2% — up from 1% the previous month.

Policymakers are wary that price increases may lead to so-called second-round effects as workers demand compensation for higher living costs. Unions have started calls for higher salaries after three years of real-wage declines.

That said, Switzerland still has one of Europe’s lowest inflation rates. Data from the euro area showed that prices rose an annual 2.4% there in April. Based on the European Union’s harmonized measure, Swiss inflation was also 1.4% last month.

The franc has been among the weakest performing Group-of-10 currencies versus the euro this year, falling nearly 5%, reflecting a surprise rate cut by the country’s central bank in March. It fell to its lowest level for a year last month, hitting 0.9845 before recovering.

In a separate release on Thursday, the manufacturing purchasing managers’ index for Switzerland released by UBS Group AG and procure.ch fell in April to 41.4, the lowest since October. A separate gauge for services jumped to 55.6, rising above the 50 threshold that signals expansion.

–With assistance from Alice Gledhill, Kristian Siedenburg and Joel Rinneby.

(Updates with PMIs in final paragraph)

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