By Ed Frankl
Switzerland's inflation rate edged down in the final month of 2024, reinforcing the Swiss central bank's decision to cut its key rate for the fourth-straight meeting last month.
Consumer prices were 0.6% higher in December than the same month of 2023, down from the annual inflation rate of 0.7% posted in November, the country's statistics agency said Tuesday. December's rate, which matched consensus expectations of economists polled by The Wall Street Journal, was the same as October's level, which was the lowest since June 2021.
The Swiss National Bank cut its key rate in December to 0.5% from 1.0% as it hoped to rein in the recently strengthening Swiss franc. The bank has reduced borrowing costs from 1.75% at the start of 2024, having seen inflation cool from highs above 3% in early 2023.
New chairman Martin Schlegel has signaled likely rate cuts ahead, arguing that negative interest rates weren't excluded from the SNB's monetary policy toolbox in an effort to put a lid on the currency and protect its exports.
The Swiss franc is seen as a safe haven by investors amid international economic uncertainty, which could rise should the incoming administration of Donald Trump in the U.S. disrupt global trade flows. The Swiss franc retreated against the euro and U.S. dollar after the inflation data release.
"The fall in Swiss inflation in December suggests that the SNB's decision to cut by a bumper 50 basis points in December was fully justified," Capital Economics Europe economist Adrian Prettejohn said in a note to clients.
Indeed, inflation could fall further in January after an anticipated decline in electricity prices, with the SNB expecting annual inflation to average at 0.3% in 2025, down from 1.1% in 2024.
The bank will most likely cut its policy rate by a further quarter-point at its next meeting in March, and cuts after that shouldn't be ruled out, Prettejohn added.
Write to Ed Frankl at edward.frankl@wsj.com
(END) Dow Jones Newswires
01-07-25 0337ET
