This is the second time that Switzerland faces a negative inflation rate after March 2021.
Something like this is bad if, and only if it persists (which may not happen here). Although a negative inflation increases the purchasing power of consumers, it could soon lead to a delay in consumption (consumers will simply wait for prices to decrease further), which can then delay investments and thus hurt the economy.
For now it seems that there is no reason for panic, though. Many Swiss economists have been expecting that, arguing that the current negative inflation is imported due to a strong Swiss franc (which is what the article seems to suggest) that reduced the price for imported goods. The downward trend was mainly driven by sharper declines in transport prices (-3.7% in May vs -2.6% in April), and in food and non-alcoholic beverages (-0.3% vs -0.8%).
On a monthly basis, the consumer price index inched up 0.1% in May compared to April. The Swiss core inflation (which excludes some volatile items such as food and energy) reached also a new low but remained positive in May at 0.5%, according to the Swiss Federal Statistics Office.
Economic forecasts see the inflation to go further down by the end of the second quarter 2025, and will increase to positive rates for the whole year 2025. But we might soon see negative interest rates in Switzerland for some time due to a strong national currency.
[Swiss National Bank] Chairman Martin Schlegel has previously said that negative inflation was possible, and didn’t rule out negative interest rates. However, he has said the bank wouldn’t be guided by individual monthly inflation prints, but rather price stability to decide policy. The SNB expects inflation to average at 0.4% this year …
Switzerland faces “mild deflation until mid-2026”, Pantheon Macroeconomics senior Europe economist Melanie Debono said in a note to clients after the inflation print … Given May’s data, that is “enough for a jumbo cut” to bring the SNB to negative rates this month, she added.
So it could be that I will stand corrected with my statement of a projected positive Swiss inflation for the entire 2025 and we’ll see this by mid-2026 as Ms. Debono says (but I like the term “jumbo cut” :-))
This is the second time that Switzerland faces a negative inflation rate after March 2021.
Something like this is bad if, and only if it persists (which may not happen here). Although a negative inflation increases the purchasing power of consumers, it could soon lead to a delay in consumption (consumers will simply wait for prices to decrease further), which can then delay investments and thus hurt the economy.
For now it seems that there is no reason for panic, though. Many Swiss economists have been expecting that, arguing that the current negative inflation is imported due to a strong Swiss franc (which is what the article seems to suggest) that reduced the price for imported goods. The downward trend was mainly driven by sharper declines in transport prices (-3.7% in May vs -2.6% in April), and in food and non-alcoholic beverages (-0.3% vs -0.8%).
On a monthly basis, the consumer price index inched up 0.1% in May compared to April. The Swiss core inflation (which excludes some volatile items such as food and energy) reached also a new low but remained positive in May at 0.5%, according to the Swiss Federal Statistics Office.
Economic forecasts see the inflation to go further down by the end of the second quarter 2025, and will increase to positive rates for the whole year 2025. But we might soon see negative interest rates in Switzerland for some time due to a strong national currency.
Addition:
There is a Morning Star / Dow Jones report on it:
So it could be that I will stand corrected with my statement of a projected positive Swiss inflation for the entire 2025 and we’ll see this by mid-2026 as Ms. Debono says (but I like the term “jumbo cut” :-))
I wonder if it would even show if they didn’t count fuel prices in the index, because they’ve been low for months.