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Investing.com -- Thursday’s report on Switzerland’s inflation rate, which held steady at 0.3% in March, was quickly overshadowed by the US’s unexpected imposition of a 31% tariff on Swiss goods.
According to Capital Economics, the new tariffs are likely to dampen both economic activity and inflation in Switzerland, increasing the likelihood of the Swiss National Bank (SNB) reducing its policy rate to zero in June, a shift from the previously anticipated maintenance at 0.25%.
The Consumer Price Index (CPI) inflation rate for Switzerland remained consistent with Capital Economics’ forecast, despite falling short of the broader consensus expectation of 0.5%.
The transport sector saw a notable decline in inflation, dropping from -1.1% in February to -2.1% in March, driven largely by cheaper air transport costs and reduced transport fuel inflation. This dip was balanced out by higher core goods and food inflation rates.
The unexpected tariff hike by the US, a decision based on the White House’s formula for calculating reciprocal trade tariffs, took analysts by surprise and is projected to lead to lower inflation over the medium term.
The Swiss franc experienced a 1% depreciation against the US dollar following the tariff announcement, which is unlikely to significantly influence inflation due to the US’s relatively small share of Swiss imports.
The economic repercussions of the new tariffs are expected to be more pronounced, considering the US accounts for a substantial 19% of Swiss exports.
Capital Economics anticipates that inflation in Switzerland will average around 0.3% for the current year, with potential downward risks affecting the 2023 forecast of 0.6%.
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