Inflation in Switzerland accelerated to a 16-month high in April, reaching its fastest pace since 2024, mainly due to rising energy prices caused by the war in the Middle East.
Consumer prices in the country rose by 0.6% year-over-year in April, the Swiss statistics office reported on Thursday. This is higher than the 0.3% increase recorded in March and matches the average estimate in a Bloomberg economists’ survey, with every forecaster expecting an acceleration in inflation. Rising petroleum product prices were a key driver of the acceleration, while oil and gas shortages also drove up costs in other sectors, including significant price hikes for vegetables and tropical fruits.
What Does the Central Bank Expect?
The Swiss National Bank (SNB) expects the surge in costs to be short-lived. President Martin Schlegel said in a speech on April 24 that “there is almost no change” in medium-term price pressure. The return of some inflation to the economy will provide the central bank with a reprieve, as it previously faced slow inflation caused by the franc’s strong position, which can depress inflation by lowering import costs.
At the same time, under local regulations, a potential rise in electricity bills will only affect consumers next year. Core inflation, which excludes energy costs, slowed to 0.3%, suggesting that price increases are not currently spreading to other sectors. However, the overall inflation figure marks the second consecutive acceleration.
What Are the Interest Rate Forecasts?
Economists are less optimistic about growth and inflation than the central bank, and do not forecast any changes to the key interest rate until 2028, expecting it to remain at zero. Investors, however, are betting on an interest rate hike by the end of this year, with futures prices indicating expectations for borrowing costs to increase by approximately 25 basis points.
The SNB forecasts that consumer price growth in the second quarter will average 0.5%. If inflation does not slow in the coming months, it could exceed the central bank’s forecast. Swiss inflation is still significantly slower than in the neighboring Eurozone, where consumer prices rose by 3% in April, the fastest pace since September 2023. According to the European Union’s harmonized index, Switzerland’s inflation rate was 0.5%.
Source: Bloomberg Economics
