Swiss Inflation Starts To Rise
The Swiss Federal Statistics Office has this morning formally updated the market on the current condition of the Swiss economy. Headlining the release was the Consumer Price Index (CPI) data for the month of May. Year on year this figure is finally showing some life, rising over the month to 0.2% from a flat 0% reading in April, the consensus estimate for this reading was just 0.1%. Month on month inflation also progressed, this months reading was 0.3% compared to 0.2% the previous month and market expectations of 0.1%.
The Swiss National Bank (SNB) has set an inflation target of 1.3% in eighteen months time, this is not an unrealistic projection. The European Central Bank for example was yesterday forced to admit that their inflation projections were well short of the mark, a two percent target was revised downward to 0.7% this year, 1.1% in 2015 and just 1.4% for 2016.
The SNB will be helped in their efforts by this morning’s strong Industrial Production data. The year on year figure came in at 4.3% for the first quarter of this year, this compares to a contraction of -0.6% over the previous quarter. Quarter on quarter the Industrial Production data is now reading at 0.5% versus a 0.4% level the previous quarter.
Finally, the reported Foreign Currency Reserves of Switzerland have risen over the month of May from 438.9Bn to 444.4Bn. Foreign reserves in Switzerland are at an elevated level since the introduction of the artificial cap placed on the exchange rate of 1.20 Swiss Francs per Euro. Although not so much recently, the SNB has in the past been forced to defend this cap in the open market by selling Francs for Euros. The build up of reserves has not since been reversed as the exchange rate has continued to hover close to the cap level.
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