Inflation in June in Switzerland rose to 3.4%

Inflation in Switzerland in June in Switzerland rose to 3.4% in June, the first time Swiss inflation exceeded 3% since July 2008.

Prices rose by 0.5% compared to May due to higher prices of fuel, oil, and vegetables. In Switzerland, the prices of red wines and salads have fallen, says Reuters.

Prices in Switzerland rose in May to their highest level in nearly 14 years. The consumer price index rose 2.9% from a year earlier as transport, food, and drink became much more expensive in a country known for historically low inflation.

Continued inflationary pressures mean a further tightening of monetary policy is likely to be needed, Swiss National Bank President Thomas Jordan said last month after the central bank raised interest rates for the first time in 15 years.

“We published a new inflation forecast. If you interpret it correctly, you see that there is probably some need for further tightening,” Jordan told a conference in Zurich.

“Households are feeling the strain as prices continue to rise,” the State Secretariat for Economic Affairs said.

“Swiss households are particularly pessimistic about how the economic situation will develop over the next 12 months,” they added, noting that inflation is reducing household purchasing power.

Inflation in Switzerland is lower than in other countries. By comparison, the rise in prices in the euro area in June reached 8.6 percent on an annual basis, according to Eurostat data. In 2021, the indicator remained at 0.6 percent, then began to accelerate with each passing month and crossed the 2 percent threshold in February, exceeding the Swiss central bank’s target for the first time.

Inflation in the Eurozone reached 8.6%

Eurozone headline inflation hit 8.6% (yearly) in June just ahead of the European Central Bank’s first rate hike in 11 years, Eurostat data showed.

The rate reached 8.1% in May, meaning that the cost of living continues to rise in eurozone countries. Germany was surprised much earlier this week when it reported a 0.5 percentage point drop in inflation every month.

Experts said this was due to new government subsidies to ease the impact of higher energy prices and no end in sight to rising inflation rates.

But both France and Spain posted new inflation records in June, with the latter surpassing the 10 percent mark for the first time since 1985, according to Reuters.

And in Bulgaria, it reached a 24-year high of 15.6%.

The ECB, which has vowed to tackle rising prices, must decide at the end of July whether to announce a rate hike. The central bank has said it will raise it again in September, meaning its key interest rate could return to positive territory this year. The ECB has kept interest rates negative since 2014.

“If the outlook for inflation does not improve, we will have enough information to move faster,” ECB President Christine Lagarde said.

If the central bank moves to raise interest rates quickly, it could further hamper economic growth at a time when a slowdown is already underway.

The general question is whether the Eurozone will be able to escape recession this year, or whether it will come in 2023.

Economists at Berenberg forecast a recession in the euro area in 2023, with GDP (gross domestic product) contracting by 0.8%.

However, further economic pressures from Russia’s invasion of Ukraine, particularly in terms of energy and food security, could push the region into a more projected slowdown sooner than expected.

Until now, ECB officials have avoided talking about a recession. The ECB forecasts a GDP of 2.8% in June for the region this year. New forecasts will be published in September.

However, policymakers in Frankfurt are aware that an economic slowdown is a major risk to watch.

Philip Lane, the bank’s chief economist, said it needed to remain vigilant in the coming months.

“With this uncertainty, we have to manage both risks,” said Lane, who is also a member of the bank’s board of directors.

“On the one hand, these could be forces that keep inflation higher than expected for longer. On the other hand, we have the risk of a slowdown in the economy, which would reduce inflationary pressures,” he added.

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