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Switzerland is an island of inflation: inflation fell from 2.9 percent to 2.6 percent in April. The decline was stronger than market watchers had predicted. Price increases in the food, energy and fuel sectors were less than in the past. Restaurants and hotels, as well as entertainment and cultural opportunities, have become more expensive than before.
For comparison: Eurozone inflation is currently 7%. not surprising.
“It’s too early to make things clear”
In Switzerland, the next interest rate decision will not be made until June, under the direction of Thomas Jordan (60) of the Swiss National Bank (SNB). The Central Bank’s declared target is to keep inflation at or below 2 percent. The current rate is not far from that. But will Thomas Jordan’s next rate hike expire, could he be the first central bank to hit the brakes?
In fact, inflation is “encouragingly low”, says Karsten Junius, chief economist at Bank J. Safra Sarasin. The significant drop is likely to pleasantly surprise the SNB as well.
Still: “It’s too early to make things clear,” says Björn Eberhardt, analyst at Luzerner Kantonalbank. “The price outlook is still characterized by uncertainties.” For example, the mortgage reference rate is likely to increase as early as June 1. When the time comes, landlords across the country will pass the hike on to their tenants. This will likely increase rent price inflation significantly in the second half of the year.
US interest rate pause – but not in Switzerland
Eberhardt expects Jordan to raise interest rates to 1.75 percent in June. For example, Credit Suisse analyst Maxime Botteron predicts that the key interest rate in Switzerland could even rise above 2 percent in the fall.
Thus, while the SNB could raise the main interest rate further, US central bank Jerome Powell is likely to hit the brakes from the summer. Due to the bank quake in the US, he needs to be especially careful about further rate hikes.
But even as Jordan continues while Powell pauses: key interest rates in Switzerland are miles away from those in the US. And it will probably stay that way.
Source :Blick
I’m Tim David and I work as an author for 24 Instant News, covering the Market section. With a Bachelor’s Degree in Journalism, my mission is to provide accurate, timely and insightful news coverage that helps our readers stay informed about the latest trends in the market. My writing style is focused on making complex economic topics easy to understand for everyone.
