https://www.thelocal.ch/20230704/how-is-switzerland-managing-to-keep-inflation-so-low
Groceries in a basket. Swiss inflation is more stable than many of its European neighbours. Photo by leonie wise on Unsplash
Inflation in Switzerland dropped below 2 percent in June. Why does the Alpine nation have one of the lowest inflation rates in Europe?
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What's the picture on consumer prices in Switzerland?
Inflation in Switzerland fell to 1.7 percent in June compared to the same month last year - down from 2.2 percent in May, according to new figures from the Federal Statistical Office (FSO).
The FSO said that consumer prices had declined thanks to the falling cost of fuel and air travel, although prices are still rising when it comes to hotels and private transport rentals.
The low rate marks a huge difference to many European countries that are still seeing soaring prices for consumer goods. In neighbouring Austria, inflation was at 8 percent in June, while in Germany it was 6.4 percent. In the Eurozone, inflation stands at around 5.5 percent.
As The Local reported in June 2022, the effects of the Covid pandemic and Russia’s invasion of Ukraine on February 24th last year drove up prices of raw materials and, consequently, of consumer goods.
Although Switzerland has bucked the trend of extremely high inflation rates, managing to keep prices at a more stable level than many other nations, the rate has still come down significantly.
Average annual inflation in Switzerland was nearly 3 percent last year, and in February this year, the rate was 3.4 percent.
What's keeping the inflation rate low in Switzerland?
There are several reasons contributing to this, including that the Swiss economy generally fares well in crises.
READ ALSO: Why does Switzerland defy economic downturns better than its neighbours?
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One point that has come up frequently is the strong Swiss franc.
According to an analysis by credit insurers Acredia and Allianz Trade, the Swiss franc has gained in value. Food prices are less dependent on the world market, and the strong Swiss franc also dampens import prices for households and businesses.
Swiss francs. Photo: Pixbabay
A strong currency keeps imports as cheap as possible and curbs consumer prices, Stéphane Monier, a financial expert at Lombard Odier Private Bank told Germany's Tagesschau recently.
In general, Switzerland exports more goods and services than it imports. And since it is not a member of the EU, Switzerland can set high tariffs.
Although people in Switzerland have not been completely shielded from rising energy prices, the country has always been less reliant on oil and gas imports than some of its neighbours.
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Its resilient energy supply - with most of its electricity coming from nuclear and hydroelectric power - has contributed to prices not going through the roof. Furthermore, Switzerland has a regulated market for electricity.
As well as energy, Switzerland also has strict controls on the price of many goods and services, which makes them less prone to fluctuations caused by inflation.
Of the products used to calculate the rate of inflation in the Eurozone, almost one in three is subject to price regulation in Switzerland - more than any other European country, reported the Bertelsmann Stiftung.
How has Switzerland responded to rising inflation?
The Swiss National Bank has raised its key interest rate a number of times to combat inflation.
In June, the bank raised the rate from 1.50 to 1.75 percent in a bid to counter inflation and ensure price stability “over the medium term", the bank said.
Economists expect the central bank to raise interest rates at least one more time in Switzerland.