Swiss inflation eased to its lowest level in over four years, as a strong Franc continued to reduce the cost of imported goods.
Consumer prices showed no annual growth in April, according to data released on Monday by Switzerland’s statistics office, down from 0.3% in March and below the expectations of nearly all economists surveyed by Bloomberg.
The decline was largely driven by lower prices for hotels and holiday accommodations, while clothing and vegetables exerted upward pressure, the agency reported.
The core inflation measure, which strips out fresh and seasonal products along with energy, also cooled more than expected, falling to 0.6%.
Last month, the Swiss Franc strengthened against all major currencies as US President Donald Trump’s unpredictable tariffs and fiscal policies drove investors toward safe-haven assets like Switzerland's currency.
Known for its persistently low inflation, Switzerland is expected by the Swiss National Bank (SNB) to see average inflation of just 0.4% this year, Bloomberg reports.
SNB President Martin Schlegel has even cautioned that inflation could fall below zero in certain months.
Slowing economic activity may further suppress prices, especially after Swiss manufacturing posted its steepest decline in four years last Friday, hit hard by both rising tariffs and the surging Franc. The government has already lowered its growth forecast for the year.
Falling consumer prices have pushed the central bank to cut its benchmark interest rate by a total of 150 basis points over five consecutive moves, bringing it down to just 0.25%.
Some economists now warn that a return to negative interest rates is increasingly possible.
The SNB’s next rate decision on 19th June may come too soon for another cut, as only one more inflation reading will be available by then and President Trump’s temporary pause in the trade war won’t expire until early July.
Nevertheless, markets have fully priced in a 25 basis-point cut at that meeting, which would bring the policy rate down to 0%. With inflation already running below the central bank’s latest projections, the case for further easing continues to gain traction.
Inflation in the euro area surrounding Switzerland reached 2.2% in April, markedly higher than Switzerland’s rate. Using the European Union’s harmonised index, Swiss inflation registered just a 0.3% increase for the same period.