Swiss Inflation at Slowest Pace Since 2021 on Power Prices

(Bloomberg) — Switzerland’s inflation rate hit the lowest level in almost four years after the country saw widespread power-price cuts at the start of the year. 

Consumer prices rose 0.4% from a year ago in January, the statistics office said on Thursday. That matches the median estimate in a Bloomberg survey of economists and is significantly below December’s reading of 0.6%.

Switzerland saw regulatory power-bill cuts of some 10% last month after prices on wholesale markets stabilized. Apart from this, the weakening inflation was also driven by air travel, clothing and footwear, according to the government agency. 

The core gauge — which excludes fresh and seasonal products as well as energy — unexpectedly ticked up.

January marks the fifth month with inflation below 1% as Switzerland continues to have one of Europe’s lowest inflation rates. There are continued fears that the gauge could drop below zero and undercut the Swiss National Bank’s target. President Martin Schlegel already warned that this might happen in some months.

What Bloomberg Economics Says…

“The decline in Swiss headline inflation in the first month of 2025 was tempered by a small increase in the core reading. If confirmed in the coming months, a more stable core reading should offer the SNB some reassurance that underlying price pressures can remain closer to the mid-point of its inflation target range. Lower energy costs are, however, likely to drive the headline reading closer to zero in the first half of the year.”

—Maeva Cousin, senior economist. For full react, click here

For the whole of 2025, the central bank expects consumer-price growth to average just 0.3%, even after it lowered borrowing costs in a surprise half-point move in December. Against this backdrop, Schlegel has highlighted that negative interest rates are an option.

The SNB targets inflation of 0%-2%, giving it more leeway to determine policy than afforded to other central banks. At least one more Swiss rate cut is likely, though economists expect officials to return to a more traditional 25 basis-point pace as the benchmark — currently at 0.5% — nears 0%.

Thursday’s price data contrast with those of the euro area, which saw inflation accelerated to 2.5% in January. Based on the European Union’s harmonized measure, the Swiss saw an advance of 0.2% in that period.

–With assistance from Kristian Siedenburg and Joel Rinneby.

(Updates with Bloomberg Economics after fifth paragraph.)

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