“The combination of strong assessment of the franc compared to the dollar, in parallel with the fall in energy prices, slowed down the assessment of prices,” said the experts of VP Bank in a comment.
The weight of rents
Consumer prices have started a decline since the start of the year. Acquuring 0.4% over one year in January, they slowed 0.3% in February and March. During the month under review, rents, one of the main spending posts for Swiss households, accelerated by 3.2%, while food and drinks prices contracted by 0.8%and health costs by 0.3%. Note that the price of chocolate flew by 13%, due to the high rise in cocoa bean prices.
Petroleum products, on the other hand, displayed a fall of 8.6%, causing with them the petrol (-7.8%) and air transport (-9.5%) prices. Since the beginning of the year, the cost of black gold has indeed dropped, the Brent of the North Sea and the American WTI having lost around 20% since the start of the year.
Rents are “the main engine of the price increase among the services,” analyzed Arthur Jurus. According to the director of investments at the Oddo BHF Swiss bank, “inflation would even have been negative” by 0.7% over a year outside rents. The continuation of the depreciation of the dollar could lead to inflation closer to -1% in early 2026, according to the expert.
Risk of American sanctions
Faced with the prospect of negative inflation, the Swiss National Bank (BNS) should lower its key rate to 0% in June, against 0.25% currently, estimated Arthur Jurus, according to which the central bank “could accentuate its communication to avoid a slippage of inflation anticipations”, in particular by evoking the possibility of introducing negative rates again.
The emission institute aims indeed a consumer price index in a range between 0% and 2% that it equates with price stability.
For VP Bank economists, the negative rates are a priori the only option of BNS, even if it is “a weapon of ultimate appeal”. Interventions on the exchange market is indeed risky due to possible American sanctions, Washington having in the past nailed to the pillory Switzerland for “manipulation” of currencies.
Related news :