Switzerland recorded an annual consumer price inflation rate of 0.1% in January, the government reported on Friday, leaving the rate unchanged from December and positioned at the lower boundary of the Swiss National Bank's (SNB) 0-2% target range. The result matched analyst forecasts.
Core inflation - the measure that strips out price moves for fresh and seasonal products, energy and fuel - remained at 0.5%, according to the release. On a month-on-month basis, consumer prices edged down by 0.1%. Officials attributed the monthly decline in part to cheaper electricity and lower prices for clothing and footwear.
EFG Bank economist GianLuigi Mandruzzato said the data does not create strong impetus for an immediate policy shift from the SNB, noting the persistence of low core inflation. He added that the central bank will be monitoring developments in the Swiss franc closely, given the currency's recent strengthening and the potential for a stronger franc to depress prices for imported goods.
"The SNB could start referring to the franc as strongly valued, to signal they are not happy and are monitoring the situation," Mandruzzato said. "It does not seem they have intervened in the forex markets to weaken the franc, but that could change."
According to the central bank's communicated framework, the 0-2% band constitutes the definition of price stability. The SNB declined to comment on the January inflation figure.
In prior statements, the SNB indicated it was prepared to allow inflation to fall below its target on a temporary basis and to tolerate short spells of negative inflation, given its focus on inflation trends over the medium term. SNB Chairman Martin Schlegel said earlier this month that the combination of subdued inflation and the bank's current policy rate of 0% placed the institution in a constrained position.
The January inflation report leaves immediate interest-rate adjustments unlikely, in the view of economists who emphasise that the SNB will be attentive to currency movements and import-price pressures that could further influence domestic price dynamics.
Summary: Switzerland's headline inflation rate held at 0.1% year-on-year in January, unchanged from December and at the bottom of the SNB's 0-2% target. Core inflation stayed at 0.5%. Month-on-month prices fell 0.1% as energy and clothing became cheaper. Economists say the reading reduces near-term pressure on the SNB but leaves attention fixed on the franc's appreciation and its impact on import prices.