Swiss Deflation Rises to 3-Year High
THE TAKEAWAY: Swiss annual CPI drops to -1.1%, lower than expected -> SNB’s Jordan appointed president -> Swiss Franc remains steady following yesterday’s decline
Annual Swiss inflation has fallen to the lowest rate in nearly 3 years despite the Swiss National Bank maintaining a policy of currency intervention. The Consumer Price Index for June was reported as 1.1% lower than the prices from June 2011, which was less than analysts’ expectations for the inflation rate to stay at -1.0%. June’s CPI was 0.3% lower than May, when prices remained constant.
Clothing prices were down by 2.8% in June, while alcohol and tobacco prices were up 1.0%, according to the Swiss Statistics Office.
The deflation comes at a time when the Swiss National Bank has been fighting the over strengthening of the Franc against the Euro with a 1.2000 EURCHF floor. Thomas Jordan was recently appointed SNB chairman after serving as the interim chairman because of his commitment to enforcing the floor. The worsening deflation allows the SNB to continue to buy foreign currencies without worrying about the effect of inflation.
The Franc remained relatively steady against the US Dollar in today’s session despite the stronger than expected deflation. USDCHF took a major rally yesterday as the ECB confirmed speculations that they would cut the interest rate for the Euro.