Swiss National Bank sees hot weather impact on food prices, not inflation

Switzerland's annual inflation rate doubled in August to its highest level in nearly two years. Concerns had been raised that smaller harvests and lower water levels on key transport routes like the Danube and Rhine could make food more expensive and push prices up. Schlegel acknowledged the effect of the dry summer on food prices, noting specific price movements, but emphasized that policy measures are in place to counteract these effects.

The SNB maintained its benchmark interest rate at 0% on Thursday, diverging from other central banks that are raising borrowing costs to combat inflation. This decision was supported by the SNB's expectation that inflation will temporarily increase before declining and remaining within its target range of 0% to 2% through mid-2029. Schlegel anticipates that the impact of higher crude oil prices will gradually fade over time.

Regarding the Swiss franc, Schlegel described its recent downturn as a minor counter-trend following years of appreciation, indicating that the currency had been strengthening almost constantly for extended periods.