Swiss Inflation Unexpectedly Slows, Giving SNB `Leeway' to Hold Key Rate

Swiss inflation unexpectedly slowed in July as lower costs for imported products helped offset higher energy prices.

Consumer prices increased 0.4 percent from a year earlier after rising 0.5 percent in June, the Federal Statistics Office in Neuchatel said in an e-mailed statement today. That’s less than the 0.7 percent median increase forecast by 14 economists in a Bloomberg News survey. In the month, prices dropped 0.7 percent.

The Swiss franc’s 8.2 percent gain against the euro since the beginning of the year has reduced the cost of imports, helping to restrain inflation as the economy gathers strength. The Swiss central bank said on June 17 that inflation may average 0.9 percent this year and 1 percent in 2011, giving it room to keep the benchmark interest rate at 0.25 percent.

“The risk of inflation remains subdued throughout the year as the franc’s strength keeps the price of imported products in check,” said Claude Maurer, an economist at Credit Suisse Group AG in Zurich. “The Swiss National Bank will leave its benchmark rate unchanged until December.”

The annual increase in the price of imported products slowed to 0.3 percent last month from a gain of 0.5 percent in June and 2.5 percent in May, according to the statistics office.

Petroleum-product inflation was 11.5 percent in July, compared with 12 percent in June and 26 percent in May.

Core inflation, which excludes the price of food and energy, was at 0.1 percent in July.

To contact the reporter on this story: Klaus Wille in Zurich at kwille@bloomberg.net.

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