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Is Swiss inflation back to stay?

Swiss inflation reappeared in February 2018 and has continued. According to the Federal Statistical Office, inflation was 0.2% in April. Since the beginning of 2018, prices have risen 0.9%.

Swiss inflation

© Björn Wylezich | - Click to enlarge

Jan-Egbert Sturm of the KOF Swiss Economic Institute says it shows the Swiss economy is doing well, and that inflation is close to what is “normal” in Switzerland.

When asked by CNN money what the Swiss National Bank’s response might be, Sturm was reluctant to guess at when the SNB might change its interest rate policy but guessed during the second half of 2019.

He doesn’t predict high wage increases. He argues that Switzerland’s recent very low inflation/deflation has delivered real wage increases. He thinks wages could rise a little bit but probably not as much as inflation because of the need to compensate companies for past real wage increases.

And while he declined to make exchange rate predictions – “exchange rates are alway very difficult to forecast” , he said the Swiss franc is still a little bit overvalued but not as much as it used to be. Switzerland’s relatively low inflation/deflation means the franc should now be worth more.

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