The Swiss Consumer Price Index (CPI) remained stable in March 2025 compared to the previous month, reaching 107.5 points (December 2020 = 100). The inflation rate rose by 0.3% compared to the same month last year, according to data released by the Federal Statistical Office (FSO).
The index’s stability compared to last month is due to divergent market trends, with rising and falling prices offsetting the impact. Prices for international package holidays, as well as daily and periodic subscriptions, saw a significant increase. Clothing and footwear prices also rose. Conversely, prices for additional housing and private transport rentals decreased, along with lower fuel and heating fuel prices.
Swiss Inflation Falls to Four-Year Low
Government data for February 2025 showed that inflation in Switzerland fell to its lowest level in nearly four years, increasing the likelihood of a rate cut by the Swiss National Bank at its next meeting. Consumer price increased by 0.3% compared to the same period last year, lowest rate of increase since April 2021. This decline was due to lower import prices. While some goods, such as rentals and package holidays, were more expensive than the previous year, products such as used cars, personal care products, and pharmaceuticals saw their prices fall.
Figures released by the Federal Statistical Office reveal that domestic product prices rose by 0.9%, while imported goods prices fell by 1.5%. This decline in imported goods prices contributed to a decline in the overall inflation rate.
Interest Rate Expectations
This data increases the likelihood that the Swiss National Bank will cut its interest rate from 0.5% at its next meeting on March 20, 2025. Markets are widely expecting a rate cut to 0.25%, while there is also a 22% chance of a rate cut to 0% at the next SNB meeting in June 2025.
Reasons for Relatively Stable Inflation in Switzerland
The relative stability of inflation in Switzerland is attributed to several key factors, including domestic and global factors that contribute to maintaining inflation levels within the Swiss National Bank’s target range.
Decline in Imported Prices
One of the most significant factors contributing to the stable inflation is a 1.5% decline in imported prices, according to data released by the Federal Statistical Office. This decline in prices is due to the lower cost of foreign products resulting from currency fluctuations and global demand. Since Switzerland imports many goods from abroad, this decline reduces inflationary pressures that could arise from higher import prices.
Stabilization of Domestic Price
At the same time, domestic product prices maintained a moderate increase of 0.9%, which contributes to balancing the inflation of imported and domestic goods. Domestic price stability helps prevent severe inflationary waves in the Swiss market and thus contributes to maintaining overall economic stability.
Swiss National Bank Policies
The Swiss National Bank pursues a monetary policy that seeks to maintain price stability within the target range of 0% to 2%. The bank’s interventions, including raising and lowering interest rates, also play an important role in controlling inflation. If inflation rises undesirably, the Swiss National Bank can take action to curb it. Conversely, if inflation declines, the bank may cut interest rates to boost economic activity.
Seasonal Effects and Temporary Reductions
Another factor that has helped stabilize inflation is seasonal effects. For example, seasonal reductions in clothing and footwear prices can lead to temporary price declines, contributing to a reduction in inflation for certain periods. These seasonal changes occur regularly and help adjust overall prices in the short term.
Consumer Price Decline in January 2025
In January 2025, the Consumer Price Index (CPI) decreased by 0.1% compared to the previous month, reaching 106.8 points (December 2020 = 100). The inflation rate rose by 0.4% compared to the same month last year, according to data released by the Federal Statistical Office.
These decreases are due to several factors, including lower electricity and additional accommodation prices. Air transport prices also fell, as did clothing and footwear prices due to seasonal sales. Conversely, hotel and private transport rental prices increased, along with higher car insurance premiums.
Decrease in the Price of Some Essential Goods
In addition to lower import prices, lower prices for some essential goods, such as used cars and personal care products, contributed to lower inflation rates. These goods typically constitute a significant portion of household expenditures, and when their prices fall, the pressure on overall inflation decreases.
The Outlook for Inflation in Switzerland
Inflation in Switzerland continues to decline, and economists confirm that the coming period may witness more stability in the markets. Despite this, observers expect the Swiss National Bank (SNB) to remain cautious in its monetary policy decisions, given the ongoing economic challenges.
Many analysts expect lower import prices to maintain stable inflation in Switzerland for a prolonged period. At the same time, a rise in prices for some domestic goods may contribute to the SNB’s decision to maintain the stability of the domestic economy in the face of global developments.
Ultimately, the economic situation in Switzerland remains relatively stable, despite the challenges the country faces in light of global market volatility. The decline in inflation to its lowest level in years reflects a delicate balance of factors, but expectations indicate that the SNB may take additional steps to ensure price stability in the future.
