- Alessandro Bee, economist at J.Safra Sarasin
Swiss annual inflation remained unchanged, whereas on a monthly basis cost of living declined, being a protracted headache for the Swiss National Bank, which has limited tools left at its disposal. The Alps economy saw its Consumer Price Index declining 0.4% in July on a monthly basis following the 0.1% drop a month earlier. The drop was driven by fall in prices of most of commodities, the Federal Statistics Office said. On an annual basis Swiss consumer prices remained stagnant as in June and in line with economists expectations. In May, however, prices rose as much as 0.2% following two months of stagnation. The price of imported goods declined by 0.7% compared with the preceding year, though domestic prices increased 0.3%, suggesting weaker price growth does not mean a lacklustre Swiss economy.
The CPI data came as the latest sign of a need to keep Swiss Franc cap at 1.20 per Euro in place introduced by the central bank in September 2011 to combat weak inflationary pressure, support Swiss exporters and ensure that Eurozone economic woes do not spill over to the Alps country. Nevertheless, deflation fears have been remaining one of the main concerns for the SNB for three years already. At its June policy meeting, the central bank revised its inflation forecast for 2014 upwards to 0.1% from a previous 0.0%, but cut its inflation outlook for 2015 and 2016 to 0.3% and 0.9%, respectively.
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