(Bloomberg) — Swiss inflation unexpectedly eased — vindicating the central bank’s surprise interest-rate cut last month.
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Consumer prices rose 1% from a year ago in March, the statistics office said Thursday. That’s the lowest reading in 2 1/2 years. Economists had predicted an acceleration to 1.3%.
The slowdown was primarily due to holiday lets, cars and private means of transportation, according to the statistics office. The so-called core gauge, which strips out volatile elements like energy and food, also decreased.
The Swiss National Bank wrong-footed investors last month by reducing its key rate. It was the first such step by a Group-of-10 central bank since the global inflation shock, with outgoing President Thomas Jordan saying he sees “very little risk” that price gains will rebound past the 2% upper end of the institution’s target range.
Still, in its most recent forecast the central bank had projected a slight quickening in inflation over the second and third quarters. According to economists, this is mainly due to rent hikes.
The Swiss franc fell to the weakest level against the euro since June after the data. It has weakened almost 1% since last month’s surprise rate cut, extending the biggest depreciation among G-10 peers.
It was trading 0.5% weaker at around 0.98 per euro as of 9 a.m. in Zurich.
SNB Vice President Martin Schlegel said last month that almost all of Switzerland’s consumer-price growth is due to rising prices for services. Still, he maintains that price stability is ensured over the medium term.
Data from the surrounding euro area showed prices there rose an annual 2.4% last month. Based on the European Union’s harmonized measure, Switzerland’s gauge for March came in at 1.1%.
–With assistance from Kristian Siedenburg, Joel Rinneby, Nour Al Ali and Aline Oyamada.
(Updates franc starting in sixth paragraph)
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