By John Revill
ZURICH (Reuters) – Swiss inflation dipped to 1.7% in June, the government said on Monday, although economists expect the Swiss National Bank to stay its course and raise interest rates at least one more time.
The year-on-year increase in consumer prices reported by the Federal Statistics Office was below the 2.2% rate in May and below the 1.8% forecast in a Refinitiv poll.
June was the first month when inflation returned to the SNB’s target for price stability, which it defines as price rises between 0 and 2% since January 2022.
Still, analysts expect the central bank to raise interest rates at its next meeting in September, with the market giving a 66% probability to a 25 basis point hike to 2%.
“Normally, these figures would have allowed the SNB to halt its monetary tightening,” said Charlotte de Montpellier, an economist at ING. “However, at the latest press conference, the SNB was quite clear and does not seem to want to take account of inflation that is temporarily below 2%.”
“As a result, and given that the other central banks are still in the process of raising their rates, I believe that the SNB will raise its rate one last time in September.”
Her view was shared by J. Safra Sarasin economist Karsten Junius, who noted that Switzerland was the first currency area where both headline and core inflation was back within the central bank’s target range.
“However this will not change the assessment of the SNB as important price components are likely to change in the coming quarters,” he said, noting how rent inflation and electricity prices could each add 25 basis points to inflation.
“Therefore, we still expect the SNB to increase its policy rate to 2% in September.”
Although Swiss price rises have been modest in comparison with the 5.5% level in the eurozone or 8.7% rate in Britain, tackling the issue was not a “luxury problem” SNB Chairman Thomas Jordan said last month, adding it was dangerous to ignore rising prices, he said.
Month-on-month, Swiss prices increased by 0.1%, the Federal Statistics Office said.
Annual core inflation, which strips out volatile items, such as fuel and food, was 1.8%, down from 1.9% in May.
(Reporting by John Revill; Editing by Tomasz Janowski)
