Zurich (Reuters) – Price decreased in Switzerland in May, marking their first decline in more than four years and increasing pressure on the Swiss National Bank (BNS) to greatly reduce its interest rate later this month.
Consumer prices fell 0.1% over a year in May, show data from the Federal Statistics Office published on Tuesday.
This is the lowest price level since March 2021, when the Swiss economy was affected by the COVVI-19 health crisis.
A reduction in interest rates by the BNS at its next meeting on June 19 is considered to be acquired by the market, which estimated 69% the possibility of a decrease in the current level of 0.25% to 0%.
Operators now estimate at 31% the likelihood that the SNB is a greater reduction, leaving its key rate to -0.25%, which would bring Switzerland back to an era of negative interest rate, which were effective between 2014 and 2022.
BNS refused to comment on this data, which means that inflation has come out of its target range from 0% to 2%.
The president of the BNS, Martin Schlegel, said last week that the central bank would take into account the medium -term evolution of inflation rather than the data of one month given, although he also said previously that the institution would not hesitate to restore negative interest rates.
Charlotte de Montpellier, an economist at ING, who expects a reduction of 25 basic points in June and a similar reduction in September, said the central bank would probably be “very bored” by the drop in inflation.
It stresses that the drop in prices is largely due to the vigor of the Swiss franc, which reduced the price of goods imported by 2.4%, as well as a sharp drop in energy prices.
“I think the rates will actually go back to negative territory,” she said, adding that the BNS should act to maintain inflation prospects in its target range from 0% to 2%.
“I think that the BNS will want to stop at -0.25% for the rate … But the risk is that the situation deteriorates even more if the franc becomes even more expensive and that the oil prices continue to fall, and that it is necessary to go even further in the negative,” she warned.
UBS and EFG Bank also provide a reduction in 25 base points in June.
(John Revill report, Diana Mandia, edited by Augustin Turpin)
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