Switzerland’s Inflation Slows for First Time in Eight Months

bcnsqfe(x3ovsetyxd66[)vr_media_dl_1.png Swiss Federal Statistical Office

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(Bloomberg) — Swiss inflation slowed in June for the first time in eight months, suggesting the impact of lower oil costs are feeding through to the domestic economy.

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Consumer prices rose 0.5% from a year earlier, down from 0.6% in May. The number matches the median expectation of economists surveyed by Bloomberg.

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Rising costs for vegetables, hotels and car rentals were offset by flights, heating oil and diesel, Switzerland’s statistics office said on Thursday. So-called core inflation, which excludes volatile elements such energy, held at 0.3%. 

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While the headline outcome is below the Swiss National Bank’s average forecast for this quarter, it remains comfortably within the range of 0-2% targeted by officials. They predict a mild inflation pickup this year, albeit with no change in medium-term pressures. 

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The data reflect a month when the external strains of higher energy costs and haven inflows into the franc showed signs of subsiding. The report also highlights how benign the oil shock has been in Switzerland compared with neighbors such as the euro zone, where price growth is much higher. 

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With interest rates at zero, Swiss officials are using currency interventions as a more active tool for now to avoid too-low inflation caused by the effect on the cost of imports from the strength of the currency. 

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Last month, policymakers reiterated their position of “heightened willingness” to sell the franc, a stance they have maintained ever since outbreak of the Iran war. In the first quarter, which included the first month of the conflict, the SNB sold 3.9 billion francs ($4.8 billion), it said on Tuesday. 

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The euro region measures consumer prices based on a harmonized rate. Using the same methodology, the Swiss inflation rate for June was 0.7% on a year-on-year basis. That compares with 2.8% in the surrounding currency zone. 

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—With assistance from Harumi Ichikura, Joel Rinneby and Kristian Siedenburg.

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