Switzerland inflation

Switzerland’s inflation accelerates again at the start of the year

The inflation rate in Switzerland rose to 3.3% in January from a year earlier, largely reflecting higher food and energy prices, the Federal Statistics Office said, the highest reading since September 2022, from 2.8% in the prior month and above market expectations of 2.9%. Core inflation that excludes fresh food, energy and fuel, remained unchanged at 2.2%.

The increase in inflation was largely driven by the 5.6% rise in food and non-alcoholic beverages prices while housing and energy prices climbed 5.1%

On the other hand, cost slowed for household maintenance (5.2% vs 5.7%), transport (4.7% vs 5.3%), and restaurants & hotels (2.6% vs 2.7%). Inflation was steady for health (at -0.4%) and education (at 0.3%).

On a monthly basis, consumer prices grew by 0.6% in January, after a 0.2% decline in December, and compared to market forecasts of 0.4%

Capital Economics’ economist Adrian Prettejohn said the rise in headline inflation will be of less concern to the central bank policymakers than the increase in the core rate to its highest level on record.

The Swiss National Bank (SNB) raised its policy interest rate three times in 2022 to counter rising inflationary pressures. The central bank said that additional rises in the SNB policy rate might be necessary to ensure price stability over the medium term. The central bank now sees average annual inflation at 2.4% for 2023 and 1.8% for 2024.

The Swiss economy is projected to grow around 0.5% this year amid weak global demand. Meanwhile, a quarter of respondents to an annual survey on personal finance by comparis.ch expect things to get worse in 2023, with the main reason being rising health insurance premiums and energy costs.

“People with low incomes in particular are expecting a tough 2023,” says Comparis consumer finance expert Michael Kuhn. Unsurprisingly, for people with a gross monthly household income of up to CHF4,000 ($4,300), 41.8% expect things to get worse. For those with a gross income of CHF4,000-CHF8,000 the figure is 28.1%, and for those with an income of over CHF8,000, 21%. Half (49%) of the low-wage group say they will have to count every franc and cut back heavily to pay all their bills.