Swiss Inflation Slowed Fourth Straight Month in August on Stronger Franc

Swiss inflation slowed for a fourth straight month in August, giving the central bank room to keep borrowing costs near zero.

Consumer prices increased 0.3 percent from a year earlier after rising 0.4 percent in July, the Federal Statistics Office in Neuchatel said today. That’s the lowest since December 2009. Economists forecast prices to rise 0.4 percent, according to the median of 16 estimates in a Bloomberg News survey. In the month, consumer prices remained unchanged.

Swiss prices may be pushed lower as a stronger Swiss franc makes imports more affordable just as a recovery is losing steam. Manufacturing growth slowed in August and leading indicators fell. Swiss central bank President Philipp Hildebrand said last month the economy will probably expand at a “slightly weaker” pace in the second half and in 2011.

“The Swiss National Bank will keep its benchmark interest rate at 0.25 percent until mid 2011,” said Alessandro Bee, an economist at Bank Sarasin in Zurich. “The recovery will weaken and inflation currently isn’t an issue.”

The franc weakened against the euro after the report, trading as low as 1.3019. The Swiss currency was at 1.3002 at 9:34 a.m. in Zurich, down from 1.2988 yesterday.

Prices of imported consumer goods dropped 0.4 percent in the year and 0.1 percent in the month, today’s report showed. Prices, excluding volatile goods such as energy, rose 0.1 percent in the year and fell 0.1 percent from July.

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

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