ZURICH (Reuters) – Swiss inflation slowed to its lowest level in two and a half years in March, pushing the Swiss franc lower and paving the way for another interest rate cut by the Swiss National Bank (NBS).
Data from the Federal Statistical Office showed on Thursday a 1% increase in consumer prices from March 2023, their lowest level since September 2021 and after +1.2% in February.
Economists polled by Reuters forecast a rate of +1.3%.
The publication of these data led to a decline in the Swiss franc against the euro, to 0.9836, its lowest level since last June.
“We had already planned two further rate cuts in June and September of this year, and inflation at this level makes this cut almost certain,” said Karsten Junius, an economist at J. Safra Sarasin.
“The SNB appears to have inflation risk under control, but it also needs to manage downside risks and avoid deflation,” he added.
The SNB declined to comment.
Its vice-president, Martin Schlegel, said last week that low inflationary pressure had enabled the rate cut. Analysts polled by Reuters expect more to follow this year.
However, according to Maxime Botteron, economist at UBS, the data is too early to influence the SNB’s next monetary policy decision expected in June.
“The SNB will further examine the inflation situation in May (…), because then there will be the impact of the increase in rents in Switzerland,” he said.
“The SNB will also take into account what the ECB and the Fed are doing,” he added, specifying that he expects the SNB to reduce its rates to 1.25% in June and to 1% in September.
(Reporting by John Revill, French version Augustin Turpin, editing by Kate Entringer)
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