INFLATION in Switzerland eased to its lowest level in two-and-a-half years in March. This has supported Swiss National Bank’s (SNB) decision last month to make its first interest rate cut since 2015, official data showed on Thursday (Apr 4).

The country’s consumer prices rose by 1 per cent from March 2023, the lowest rate since September 2021 and down from 1.2 per cent in February.

It was the 10th month running that inflation has come within the the central bank’s zero to 2 per cent target range.

A Reuters poll had forecast a 1.3 per cent reading.

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

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

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

SNB vice-chairman Martin Schlegel last week said that 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 central bank that it was right to cut rates, but it was still 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 European Central Bank and the Fed do,” he said.

“If they cut rates there’s more likelihood of the SNB also cutting rates again because it will not want to risk the franc rising in value again,” Botteron added.

He expects the SNB to cut rates to 1.25 per cent in June and 1 per cent in September. REUTERS