Swiss inflation rises to 0.2 percent in July

Swiss inflation rose again in July, reaching 0.2 percent year-on-year. This follows a dip into negative territory in May, which fuelled deflation fears, the Swiss Federal Statistical Office (SFSO) reported on Monday.

In June, inflation had already climbed back to 0.1 percent year-on-year. It continued to strengthen in July, driven by a 0.7 percent year-on-year increase in the price of Swiss-made products, the SFSO said in a statement. This rise in domestic product prices was offset by a 1.4 percent year-on-year drop in import prices in July. This was primarily due to an 8.9 percent fall in petroleum product prices.

Month-on-month, the consumer price index remained stable in July at 107.8 points. This reflects "opposing trends, which overall balanced each other out," the statement said. Prices decreased compared to June for travel packages, air transport, and clothing and footwear due to the summer sales. However, prices increased in the hotel and para-hotel sectors, the SFSO detailed.

July's inflation slightly exceeded the forecasts of economists surveyed by the Swiss agency AWP. They expected it to be around 0 percent and 0.1 percent year-on-year, and between -0.2 percent and -0.3 percent month-on-month. The wave of inflation in Switzerland was quickly controlled. In recent months, economists even began to worry about its decline being too rapid.

In May, inflation dipped into negative territory at -0.1 percent. This raised concerns that the Swiss central bank might return to negative interest rates to prevent further price declines. At its quarterly monetary policy meeting in mid-June, the central bank opted for a quarter percentage point cut. This brought its key interest rate to zero, avoiding a return to the negative rate that prevailed between 2015 and 2022. This was partly due to the significant uncertainty surrounding US tariffs.

Since Friday, Switzerland has been reeling from the White House's announcements. It has decided to apply a 39 percent surcharge to Swiss products imported into the US. This is higher than the 31 percent announced in early April. The Swiss government hopes to use the few days of respite granted by Donald Trump to negotiate concessions.

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