An unexpected decrease in the inflation rate was recorded in Switzerland.

The mentioned result is fully correlated with the March decision of the central bank of the specified country to cut the interest rate. Also, the decrease in inflation can be considered as a kind of harbinger of the fact that the Swiss financial regulator will continue to lower the cost of borrowing in the foreseeable future. At the same time, it is worth noting that a slowdown in the growth of prices of goods and services at a certain point is not an absolute guarantee of the subsequent preservation of the corresponding dynamic.

Last month, inflation in Switzerland was fixed at around 1%. The relevant data was published by the country’s statistical office on Thursday, April 4. It is worth noting that the March inflation rate is the lowest in the last two and a half years. Last month’s result exceeded preliminary expectations. Economists had predicted that inflation in Switzerland would be 1.3% in March.

The Swiss National Bank shocked investors last month. In this case, it implies the decision of the financial regulator to lower the key rate. This was the first such decision by the central bank of the Group of 10 after the global inflation shock. Thomas Jordan, President of the Swiss National Bank, said that, in his opinion, the probability that inflation will exceed the financial regulator’s target of 2% is minimal.

At the same time, the latest forecast of the Swiss central bank contains a statement that in the second and third quarters of 2024, the growth in the cost of goods and services in the country will accelerate. Economists say that this vision, outlined by the financial regulator, is mainly related to rent increases.

After the publication of information on inflation, the Swiss franc fell to its lowest level against the euro since June last year. The Swiss national currency weakened by almost 1% after an unexpected lowering of the interest rate in March. This indicator is the most significant depreciation among the G-10 countries. On Thursday, the franc exchange rate was about 0.98 per 1 euro.

Karsten Junius, chief economist and head of the Economic and Strategic Research unit at J. Safra Sarasin Bank in Zurich, says that the decline in inflation is surprising since the Swiss national currency has weakened over the past few months. According to the expert, there is a significant probability that in June and September, there will be another lowering of the interest rate in this country. Karsten Junius also says that there are risks to achieving the inflation target.

The Swiss statistical office reported that the slowdown in inflation last month was mainly due to holiday lets, cars, and private means of transportation. The so-called core gauge of the growth in the cost of goods and services, which does not take into account such volatile elements as energy and food, also showed a decrease in March.

Maxime Botteron, an economist at UBS Group AG in Zurich, says that last month’s data indicate that inflationary pressures in Switzerland are easing faster than preliminary expected. The expert also said that the impact of the March result on the monetary policy of the country’s financial regulator would be limited. Maxime Botteron expects the Swiss National Bank to cut the interest rate by 25 basis points in June and September.

Martin Schlegel, vice president of the Swiss central bank, said in March that almost all of the increase in consumer prices was due to a similar dynamic in the service sector. He also noted that price stability is ensured in the medium term.

In the eurozone, consumer prices in March showed an increase of 2.4% year-on-year.

As we have reported earlier, Swiss Economy Demonstrates Growth.