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Swiss Inflation Remains Flat

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Swiss Inflation Remains Flat

There is zero growth in consumer prices in Switzerland according to the latest Consumer Price Index (CPI) information released by the Swiss Federal Statistics office. The year on year reading for April remains at 0.0%, no change on last month, markets had been anticipating a slight 0.1% gain. Month on month expectations of a 0.1% rise were met but this represents a 0.3% fall from the March figure.

Switzerland is neither a Eurozone nor an EU member but it’s location in the heart of continental Europe and it’s participation in both the European Free Trade Agreement (EFTA) and the Schengen Area mean that it’s economic fortunes are loosely tied to that of it’s neighbors.

No real surprise then to see the Swiss economy struggling with the same low inflation troubles that are afflicting it’s peers. Despite having it’s own currency and control over it’s own monetary and fiscal policy decisions, Switzerland has in fact experienced greater inflation issues than most if not all Eurozone countries during the recent crises.

On the surface today’s reading of zero percent price growth appears to highlight a significant problem for the Swiss economy, particularly as there is no evidence of a pick up on the previous month. The reality however is that Switzerland is gradually, but emphatically, clawing it’s way back out of a deflationary period that lasted well over a year. Swiss consumer prices were contracting by 1.1% towards the end of 2012 so to escape the dangerous deflationary spiral and bring this reading back to even flat growth has to be considered an achievement.

Switzerland has near zero interest rates at the moment and an exchange rate policy that artificially caps rises in its currency against the Euro. However, full employment and low public debt offer plenty of breathing space for the Swiss economy to wait for the ongoing global recovery to take hold.

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