- After rising sharply in the first two months of the year, inflation in Switzerland fell significantly again in March.
- Inflation is now back at year-end levels.
Specifically, annual inflation fell to 2.9 percent in March from 3.4 percent in February, as reported by the Federal Statistical Office (BFS). It rose significantly in January and February due to higher electricity and flight prices, among other things. Now it is trading at the same level as in December.
The decline is not entirely surprising, but it was a bit stronger than expected. Economists polled by AWP had put March inflation in the 3.0 to 3.3 percent range. With the current value, Switzerland’s inflation rates are also well below those of the euro zone or the USA, where values of 6.9 percent and 6.0 percent (February) were last reported. Most recently, however, inflation has also fallen significantly in these regions.
Import goods still expensive
Imported goods (+3.8%) are still significantly more expensive than a year ago, while domestic goods cost 2.7 percent more than in March 2022. However, both values are lower than in February. Core inflation, which excludes volatile commodities such as food, energy and fuel, also fell to 2.2 percent in March from 2.4 percent in February.
Compared to the previous month, however, the national consumer price index (CPI) increased slightly by 0.2 percent to 106.0 points. Analysts polled by AWP had expected an increase of 0.2 to 0.5 percent.
According to the BFS, flights and package tours, as well as new cars, have become more expensive. The prices for fruit vegetables have also increased, or those for clothing and shoes after the end of the winter sale. On the other hand, the prices in the non-hotel sector or those for heating oil and berries were cheaper than in February.
The fact that annual inflation fell significantly despite the price increase compared to the previous month is primarily due to statistical reasons and is called the base effect. In March of last year, for example, the prices for fuel and heating oil rose sharply after the start of the Ukraine war – now this effect has fallen out of the statistics again after a year.
Swiss National Bank should breathe a sigh of relief
The Swiss National Bank is also likely to have followed the figures very closely and is looking to the future with corresponding calm. As is well known, it fights inflation primarily by raising interest rates. In the last nine months, for example, it has raised its key interest rate four times from -0.75 to 1.5 percent.