Swiss Inflation Slows Less Than Expected Before SNB Meeting

(Bloomberg) — Swiss inflation eased less than anticipated in February, a development that might mute speculation about the central bank lowering interest rates earlier than expected.

Consumer prices rose 1.2% from a year ago, the Swiss statistics office said Monday. While that’s just off the 1.1% median prediction in a Bloomberg survey, it’s down from 1.3% in January and also much less than the Swiss National Bank’s estimate for the first quarter.

The so-called core gauge, which strips out volatile elements like energy and food, slowed to 1.1%.

The drop comes amid mounting speculation that the central bank might accelerate its timeline for monetary loosening. While a majority of economists forecast that the SNB will wait until September before its first rate cut, a growing number of analysts expects a step in June or even at officials’ next policy decision on March 21. 

Still, VP Bank AG chief economist Thomas Gitzel, who doesn’t see any SNB move this year, pointed out that prices rose 0.6% on the month, triple the pace of January.

“Price momentum increased substantially in February,” he wrote in a note to investors. “This is precisely why the SNB will proceed cautiously when it comes to rate cuts.”

Unlike its major peers, the Swiss central bank only meets once a quarter, making this month’s gathering the first one of the year.

SNB President Thomas Jordan might see the reading as vindication as he on Friday touted the central bank’s ability to deliver on price stability when commenting on his surprise move to step down later this year.

“Thomas Jordan will want to be sure that all inflation risks are mitigated before he leaves in September,” Gitzel said. “He could leave the easing to his successor. We don’t expect any interest rate cuts this year.”

Apart from easing price pressures, the strong franc shields the economy from importing higher inflation from elsewhere. After reaching an all-time high against the euro at the beginning of the year, the currency has lost some ground, a fact recognized by the SNB. 

Data from the surrounding euro area showed that prices rose an annual 2.6% there last month. Based on the European Union’s harmonized measure, Switzerland’s gauge was 1.2% at the same time.

–With assistance from Joel Rinneby and Kristian Siedenburg.

(Updates with economist comment from fifth paragraph)

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