here's where prices will rise in 2025

After months of turbulence, inflation appears to be under control according to the Swiss National Bank. But what are the impacts on prices and what does this year hold? Here are the trends.

Niklaus Vontobel / ch media

After months of turbulence, prices are now increasing at a pace that the Swiss National Bank (SNB) considers consistent with “price stability.” For six months, inflation even paused, prompting the SNB to lower its key rate to 0.5% in the face of a dynamic considered too weak.

The inflationary storm seems to be over, but what are the results? How much have prices actually increased? Why have gasoline and electricity experienced spectacular increases, as have rents, mortgages, plane tickets and even food products? And above all, what does the future hold for these different expenditure items?

The Swiss Consumer Price Index, published by the Federal Statistical Office (FSO), offers valuable answers. This index, which regularly measures price variations on a typical basket of goods and services, provides a clear overview of changes in the cost of living.

According to the latest figures, in November 2024, prices increased by 5% compared to November 2021. In three years, marked by a strong inflationary surge in 2022 and 2023 before a return to calm, the cost of living has increased by an average of 5%.

Gasoline and fuel oil: back to normal

Good news: oil prices have returned to levels similar to those before the inflationary wave. Largely this is due to two factors in China:

In Switzerland, these trends are reflected in a stabilization of gasoline and fuel oil prices. Certainly, the decline was slower than the rise, but these costs have now returned to their pre-crisis levels.

Electricity and gas: still under pressure

For electricity, the scenario is different. Prices remain around 50% higher than before. According to the regulatory authority Elcom, a drop of 10% is planned for 2025, but this will not be enough to compensate for the sharp increases in the past. Gas, meanwhile, still costs 60% more than two years ago, particularly affecting those who use it for heating or cooking.

These high prices can be explained by the after-effects of the European energy crisis triggered by the war against Ukraine and the collapse of Russian gas supplies. Despite Europe's efforts to diversify its sources, notably via imports of liquefied gas, partial dependence on Russia remains a risk factor.

Gas and electricity are important for European production, as explained by Javier Blas, expert at Bloomberg. Europe may still have enough gas in reserve, but it has been very lucky weather-wise. Indeed, the last two winters have been humid, hot and windy. This allowed wind turbines to spin, solar panels to shine, dams and fuel oil tanks to be well filled.

Another source of concern: Russian gas continues to arrive in Europe, but less by pipeline and more in liquid form by roads and waterways. Europe is therefore less dependent on Putin, but it still remains so, as Blas points out. If Putin cuts off his gas, Europe will find itself in trouble.

These two concerns – Putin and the weather – keep gas prices highthus preventing a further drop in electricity prices in Europe and Switzerland. However, it would have been possible in our country. According to Elcom, this did not happen due to the multi-year contracts with which Swiss suppliers source their supplies from the European market. These contracts certainly protected Switzerland from the worst effects of the European energy crisis, but they also prevented Swiss electricity prices from falling more rapidly again.

But the good news is that they should continue to fall with some delay. According to Elcom, European wholesalers expect prices to fall in the coming years.

Food: a continued rise

High electricity and gas prices have contributed to widespread rate increases in several sectors. In catering, menus today show an average increase of 6.6%, while hotels have seen their prices increase by 11%. In the sale of food products, costs have also increased, with an average of +7%.

In 2025, shopping will cost more for the Swiss.Image: keystone

For food products, global prices of key raw materials played a decisive role. For example, grain prices have soared, and olive oil has temporarily cost nearly three times as much due to heat waves and droughts that have destroyed important crops. In Switzerland, bread now costs 11% more, while pasta is up 17%. The largest increases concern margarine and dietary fats (+24%), sugar (+26%), and olive oil (+37%).

For 2025, food prices are expected to increase overall at a more moderate pace. However, increases remain likely for some key raw materials on the global market. With climate change, droughts and heatwaves, as well as crop failures, are becoming more frequent, leading to price surges. As the UN points out in its report Food Outlook, products such as tea, coffee, and especially cocoa, are particularly affected by these phenomena.

Airline tickets: inflation took off

Above the clouds, inflation was also considerable this year. According to the national index, flying between January and November 2024 cost almost 30% more than in 2019, the last year before the Covid-19 crisis.

The airline Swiss and the Swiss Tourism Federation point the finger at the costs. Almost everything an airline needs to satisfy its customers has become more expensive: staff, air traffic control or security checks, among others. This is why Swiss expects average prices to remain higher than before the pandemic. In the long term, plane tickets are expected to remain as expensive as today, or even increase further. The transition to less polluting air transport, with a reduction in CO2 emissions, will involve significant investments.

Flying will always cost more.Image: keystone

However, the price differences remain marked. According to the Swiss Travel Federation, low-cost companies continue to offer tickets from 50 euros on European flights, where competition is fierce. Conversely, on intercontinental flights, as before the pandemic, competition remains limited, which keeps prices high, particularly in high season.

Rents: The situation is getting worse

Rents have also increased significantly. In November 2024, the Swiss Consumer Price Index showed an increase of 7.4% compared to November 2021, marking a sharp increase in prices for one of the heaviest expenditure items for households. This increase is mainly due to increases in the key rates of the Swiss National Bank (SNB), which led to an increase in the average rate of outstanding mortgages. As a result, the reference rate used for rental contracts was raised twice, which mechanically caused rents to rise.

Rising construction costs have also contributed to this situation, limiting the construction of new homes and reducing available supply. New tenants therefore had to pay even higher rents.

However, a slight lull is looming thanks to recent cuts in key rates. The reference rate should be revised downwards once this year, or even twice according to forecasts from Raiffeisen Bank. In the construction sector, a recovery is underway, which should slightly reduce the housing shortage.

According to Raiffeisen, rent growth will soon slow, increasing at a rate less than half that of recent years. In summary, the situation will continue to deteriorate, but at a slower pace than before.

Mortgages: falling rates

The National Bank quickly increased its key rate, then lowered it just as quickly. Mortgage rates followed the same trend: they first rose, then fell. Currently, according to UBS, the majority of mortgages indexed to the money market have rates between 1.1% and 1.6%. Within a year, these rates could fall further to between 0.8% and 1.3%.

As for 10-year fixed mortgages, their rates have already decreased by 0.8 percentage points in one year. However, UBS expects stabilization: current rates, between 1.1% and 1.6%, should remain unchanged in the coming months.

While mortgages have become more affordable, property prices continue to rise to even more dizzying levels. Result: even with lower interest rates, buying a home remains expensive, even inaccessible for many households. Economists wonder: who can still buy at these prices? The answer is often the same: those who inherit.

^{Translated from German by Anne Castella}