Swiss inflation edged higher in December, rising for the first time since July and easing pressure on the Swiss National Bank (SNB) to consider a return to negative interest rates.
The modest increase reinforces policymakers’ recent assessment that price growth, while subdued, is likely to pick up gradually over the coming months.
Consumer prices rose 0.1% from a year earlier, Switzerland’s Federal Statistical Office said on Thursday.
The reading followed zero inflation in November and matched the median forecast of economists surveyed by Bloomberg.
While still well below levels seen in neighboring economies, the uptick marks a notable shift after months of stagnation.
Inflation aligns with SNB outlook
The December result means inflation for the fourth quarter is in line with the SNB’s forecast of 0.1%.
That projection was lowered slightly last month, when policymakers led by President Martin Schlegel decided against cutting the policy rate below zero.
At the time, officials cited expectations that consumer-price growth would advance modestly, reducing the need for further monetary easing.
Underlying price pressures also showed signs of firming.
A measure of core inflation, which strips out volatile components, accelerated to 0.5%, suggesting that price increases are not limited solely to temporary factors.
Still, overall inflation remains far below the SNB’s medium-term target of price stability, which it defines as inflation below 2%.
For the full year, Switzerland’s inflation rate stood at 0.2%, according to officials.
That marked the weakest annual outcome since the first year of the Covid-19 pandemic, underscoring the persistent disinflationary forces facing the economy.
Cost pressures remain limited
The slight acceleration in prices was driven by higher costs for rent, education, and tobacco products, the statistics office said.
These increases were enough to lift the annual rate above zero, even as other components continued to exert downward pressure on the overall index.
Looking ahead, inflation is expected to remain subdued at the start of the new year.
Electricity prices were reduced by around 4% nationwide with the turn of the year, a move that is set to weigh on January’s inflation reading.
In addition, companies are anticipating slower wage growth, which could further limit upward pressure on prices.
In December, the SNB revised down its inflation forecast for 2026 to 0.3% from a previous estimate of 0.5%.
For the first quarter, the central bank expects inflation to average just 0.1%, highlighting the continued fragility of price dynamics.
Growth risks cloud outlook
While the latest inflation data may reduce immediate pressure for further easing, risks to the outlook remain.
Earlier this week, data showed that Swiss manufacturing activity unexpectedly fell to a seven-month low, raising concerns about a slowdown in economic momentum.
Weaker activity could challenge expectations of stronger growth following a trade deal with the United States, potentially weighing on inflation prospects later in the year.
Against this backdrop, policymakers will be watching closely to see whether the recent uptick in prices can be sustained.
By comparison, inflation in the surrounding euro area remains significantly higher.
Based on the European Union’s harmonized measure, Swiss inflation stood at 0.2% in December, underscoring the country’s continued divergence from its neighbors in terms of price pressures.
The post Swiss inflation stirs after months of calm, reducing pressure for negative rates appeared first on Invezz