Swiss deflation continues for 17th consecutive month

Today’s released consumer price index data for March, showed that Swiss economy is in clear deflation for 17th consecutive month and it is now getting worse once more. Last time data was positive, was back in August, when price edged up by 0.1%. Last year it dropped to record low, declining -1.4% y/y. From there it improved to -0.8% in February and now for March it again edged lower to -0.9%.

Swiss National Bank (SNB) after reducing rates to -0.75% in January, 2015, while withdrawing from Euro/Franc peg, hasn’t taken up any further actions to pop up prices, instead it maintains its passive strategy to control, Euro/Franc rate.

However, yesterday’s data from Swiss National Bank (SNB) showed that FX reserve rose to $576 billion or 82% of GDP, suggesting that SNB’s indirect balance sheet expansion may be reaching its limit. However, this higher exchange rate, failed to dent Switzerland’s large current account surplus, which is still maintained close to 7% of GDP. Moreover Jobless rates are also holding around 3.6%, well below OECD average.

It is more likely that SNB will be a passive watcher rather than taking active policy actions, especially after policy easing by both European Central Bank and Bank of Japan failed to weaken respective currencies.

Franc is currently trading at 0.956 against Dollar.