Inflation continues to bite in Switzerland

The strong franc only goes so far in protecting Switzerland from inflation. © Keystone / Gaetan Bally

The cost of goods and services in Switzerland rose 3.5% in August compared to the same month last year, but the inflation rate still remains below that of many other countries.

Prices for imported goods leapt 8.6%, according to the Federal Statistical Office (FSO), while domestic products went up 1.8%.

Rising energy and fuel costs are the main drivers of inflation – the annual rate of inflation was 2% in August when these factors are stripped out.

But the increased cost of hospital care and welfare, along with rental hikes, also contributed to the burden, said the FSOExternal link.

The Swiss National Bank, which raised interest rates by 0.5% in June, predicts inflation to dampen to 2.9% by the end of the year.

Consumers in Switzerland have been impacted less by inflation than other countries, such as the European Union, Britain and the United States, where rates are currently between 8% and 9% and may go into double digits this year.

Switzerland is protected by the strong purchasing power of the highly sought after Swiss franc.

Forecasting group BAK Economics said in the summer that moderate salary increases and an easing of the supply logjams could also bring prices more under control.

But the Swiss electricity regulator has warned households to expect large hikes in bills next year and some industries are warning that they will have to pass on cost increases to consumers.