Swiss Inflation Dips Slightly as SNB Cuts Interest Rates Again

Swiss inflation slightly dipped last month, with consumer prices rising by 1.3% compared to a year earlier. Though some product prices increased, this was offset by cheaper air transport, petrol, and diesel. The Swiss National Bank cut interest rates to 1.25%, with plans for further cuts anticipated in September.

Swiss inflation dipped slightly last month, government data showed on Thursday in the first reading on prices after the Swiss National Bank (SNB) cut interest rates again last month. Consumer prices rose by 1.3% in June compared with a year earlier, against the 1.4% rate in May and the 1.4% forecast in a Reuters poll.

It was the 12th month in succession that Swiss prices have been within the 0-2% range targeted by the SNB, which it describes as price stability. Month on month prices remained unchanged, the Federal Statistics Office said.

While some products, including vegetables, foreign holidays and hotels, registered price increases, this was offset by cheaper air transport, petrol and diesel. Clothing and footwear were also cheaper because of retailers' summer sales. The SNB cut interest rates to 1.25% last month, the second cut this year, saying underlying inflationary pressure has decreased.

The central bank also lowered its inflation forecasts, fueling analyst expectations of a further rate cut in September. UBS economist Alessandro Bee expects lower inflation in the third quarter of 2024, leaving the path open for the SNB to cut rates.

"If this scenario materialises, inflation should not be a hurdle for the SNB to cut rates," said Bee. "I think we need to see a significant surprise on the upside for the SNB to keep rates on hold."

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