Key facts
- Record temperatures have impacted food prices but not overall Swiss inflation.
- Swiss annual inflation rate doubled in August to its highest in nearly two years.
- The SNB expects inflation to decline and remain within its 0% to 2% target range through mid-2029.
- The SNB held its benchmark interest rate at 0% on Thursday.
- The rise in Swiss inflation is almost exclusively attributable to petroleum products.
- The recent downturn in the franc's value is seen as a minor counter-trend.
Swiss National Bank Chairman Martin Schlegel stated that while this year's record temperatures have influenced food prices, they have not been a driver of Switzerland's overall inflation. In an interview broadcast on Saturday, Schlegel explained that the recent surge in inflation is almost entirely due to petroleum products.
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.