Data released on 3 July 2023 showed year-on-year inflation in June falling to 1.7%, down from 2.2% the month before. During the month of June 2023, prices rose 0.1%, which translates to an annualised rate of 1.2%, well below the Swiss National Bank (SNB) target rate of 2%.
Underlying inflation, which strips out volatile elements such as energy and food, also slowed to 1.8%, according to the Federal Statistical Office (FSO). This means both Switzerland’s headline and core inflation rates are below the central bank target of 2%.
Items falling in price in June 2023 included petrol, diesel, air transport and stone fruit. However, cruciferous vegetables and fruit in general rose in price.
While the lower increase in Switzerland’s consumer price index (CPI) is welcome news, it is unlikely to be enough to prevent the SNB lifting its interest rate again in September 2023, which many expect to rise to 2%, up from 1.75% today.
The main force driving down inflation is declining fuel prices, a trend that may be running out of steam.
In addition, a wave of electricity price hikes, rent rises and higher services prices have been announced that have yet to work their way through the pipeline. Just this week, Swiss Post and Swiss Rail announced price increases. These will add to inflation going forward. After factoring in these future price rises, policymakers expect inflation to return to 2% by the end of 2023 and run at above that level until early 2026.