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Welcome Pick Up In Swiss Inflation

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Welcome Pick Up In Swiss Inflation

Switzerland has released Consumer Price Index data for March. The year on year figure is back to a neutral 0% from January’s print of -0.1%, market expectation had been for inflation to continue at -0.1%. The month on month change is also very encouraging at 0.4% versus the previous months increase of just 0.1%, the consensus estimate on this monthly figure was for a 0.2% rise.

The Swiss National Bank (SNB) remains committed to maintaining the cap on the Swiss Francs appreciation against the Euro. The SNB is citing the upward pressure on the Swiss Franc for hampering a recovery in the countries inflation rate.

Switzerland has been teetering on the deflationary brink for some time now but it appears that this risk is slowly dissipating. Certainly today’s pickup in inflation, albeit slight, will be greatly welcomed by the Swiss authorities.

Swiss inflation dipped as low as -1.2% in 2012 however the SNB are now projecting a flat 0% inflation rate in 2014 rising to 0.4% in 2015 and 1% in 2016. These projections had recently been lowered by the SNB but if the uptick in prices continues at the pace seen this morning it is likely that the next quarterly bulletin will contain some stronger projections.

Despite the concerning inflationary position the unique nature of the Swiss economy is proving resilient. The country is currently enjoying a full employment situation, the unemployment rate is at a very enviable 3.4%. GDP growth however has been falling back, currently at 1.7% this is down almost a full percentage point from one year ago.

Swiss interest rates have bottomed out at 0%, which leaves the SNB in a position similar to most global central banks, in that there is nothing left in the tank to create further stimulus. Judging by this morning’s inflationary uptick however it may be that the Swiss economy can make its own way back from here.

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