A strong franc shielded Switzerland from inflation which is now lowest since Sept 2021

ZURICH (Reuters): Swiss inflation eased to its lowest level in two-and-a-half years in March, supporting the Swiss National Bank’s decision last month to make its first interest rate cut since 2015, official data showed on Thursday.

Consumer prices rose by 1 per cent from March 2023, the lowest rate since September 2021 and down from 1.2pc in February.

It was the 10th month running that inflation has come within the SNB’s 0-2pc target range. A Reuters poll had forecast a 1.3pc reading.

Switzerland has been shielded from inflation by the strong franc, with imports declining in price by 1.3pc during March.

The cost of food, and restaurants and hotels came down.

The SNB in March cut its key rate to 1.5pc and said it expects inflation to remain low over the next few years.

SNB Vice Chairman Martin Schlegel last week said low inflation pressure had enabled the rate cut, and analysts polled by Reuters expect more to follow this year.

Month-on-month prices did not change, according to data from the Federal Statistics Office.

Another month of low inflation will reassure the SNB it was right to cut rates, but it was too early to sway the next policy decision in June, said UBS economist Maxime Botteron.

“The SNB will look more at the inflation situation in May before deciding what to do with rates in June, because then there will be the impact of increased rents in Switzerland,” he said.

“The SNB will also consider what the ECB and the Fed do. If they cut rates there’s more likelihood of the SNB also cutting rates again because it will not want to risk the [Swiss] franc rising in value again,” said Botteron, who expects the SNB to cut rates to 1.25pc in June and 1pc in September.