By Ed Frankl
Swiss annual inflation picked up in June, but stayed near deflationary levels, maintaining the possibility that the Swiss National Bank might still push rates below zero later this year.
Consumer prices were 0.1% higher than the same month of last year, compared with annual inflation of minus 0.1% in May, Switzerland's statistics office said Thursday.
The SNB last month cut its key rate to zero as it sought to rein in demand for the Swiss franc, which has acted as a safe haven due to investor concerns over U.S. trade policy and increased geopolitical worries in the Middle East. However, the bank refrained from sending the key rate into negative territory, where it settled for nearly eight years until 2022.
A rapidly appreciating franc dents demand for Swiss exports, which include luxury watches and pharmaceuticals. The franc has gained nearly 15% against the dollar since the start of the year, a rise that has lowered the price of imported goods and services and sent inflation spiraling downward.
Annual domestic inflation came in at 0.7% in June, while imported-product prices were 1.9% lower than last year, the statistics office said.
The SNB wouldn't discount pushing rates below zero, though that decision wouldn't be taken lightly given the challenges it raises for firms and households, the bank's Chairman Martin Schlegel said at the press conference after the rate decision. The SNB's target is positive annual inflation up to 2%.
Inflation will remain around zero, or just below, for the rest of the year, Capital Economics economist Adrian Prettejohn said in a note to clients.
"Persistently weak inflation is likely to encourage the SNB to cut its policy rate into negative territory later this year, most probably at its next meeting in September," he added.
Write to Ed Frankl at edward.frankl@wsj.com
(END) Dow Jones Newswires
07-03-25 0357ET
