Swiss Inflation Rate Drops

Switzerland’s inflation rate dropped the most in 15 years in November as the price of oil declined, giving the central bank more leeway to bolster the economy., 12/2/2008 5:32:35 AM

Consumer prices rose 1.5 percent from a year earlier after increasing 2.6 percent in October, the Federal Statistics Office in Neuchatel said today. That’s the biggest drop since November 1993. Economists forecast the rate to decline to 2 percent, according to the median of 15 estimates in a Bloomberg News survey. Prices fell 0.7 percent from the previous month.

Swiss inflation may slow further in the coming months after a 68 percent drop in oil prices since mid-July helped reduce energy costs. The Swiss National Bank has reduced interest rates faster than almost any other central bank to cushion the economy from a global recession and a worldwide financial crisis.

This is the first time the pace of inflation in Switzerland has slowed to less than 2 percent, the central bank’s definition of price stability, since November 2007. Central banks from Washington to Beijing have reduced their benchmark rates as a liquidity crunch and falling commodity prices switched policy makers’ emphasis from price growth to the state of the economy.

The Swiss economy may have contracted in the third quarter and may shrink in 2009, SNB President Jean-Pierre Roth said. Switzerland’s leading economic indicators fell to the lowest level in more than five years in November and manufacturing contracted at the fastest pace since at least 1995.

With price increases abating, the SNB may have more room to loosen monetary policy to counter stalling growth. The SNB has cut 175 basis points off its main interest rate since the beginning of October. At 1 percent, Switzerland’s benchmark is among the lowest of major economies.

Swiss Inflation Rate Drops