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Swiss Consumer Prices Rise Less Than Economists Forecast

May 10 (Bloomberg) -- Swiss consumer prices increased less than economists forecast in April, giving the central bank room to keep borrowing costs on hold next month.

Consumer prices rose 0.3 percent from a year earlier after advancing 1 percent in March, the Federal Statistics Office in Neuchatel said in an e-mailed statement today. Economists had forecast a gain of 0.6 percent, according to the median of 11 estimates in a Bloomberg News survey. In the month, consumer prices rose 0.1 percent.

Swiss central bank President Philipp Hildebrand said on April 29 the franc’s appreciation has helped keep inflation developments “moderate so far.” European Central Bank President Jean-Claude Trichet signaled last week that the bank may keep borrowing costs on hold next month after increasing the benchmark interest rate for the first time in almost three years in April to fight inflation threats.

“People expected a higher inflation rate,” said Reto Huenerwadel, an economist at UBS AG in Zurich. “One shouldn’t over-interpret the April reading, however. We’ll see a stronger inflation threat emerging in the future.”

The franc dropped after the release, trading as low as 1.2623 against the euro. It was at 1.2602 at 9:36 a.m. in Zurich and traded at 87.77 centimes against the dollar.

Core Inflation

The franc has strengthened 13 percent against the euro over the past year, helping contain price pressures by making imported goods more affordable. Surging energy costs are driving inflation across the 17-member euro-region economy and prompted the ECB to raise its benchmark rate by 25 basis points to 1.25 percent last month.

The cost of fuel rose 5.9 percent from a year earlier, while heating oil was 16 percent more expensive, today’s report showed. Prices of imported consumer goods dropped 0.5 percent, while domestic goods were 0.5 percent more expensive. Consumer prices, excluding volatile components such as food and energy costs, slipped 0.1 percent in the year.

The Swiss National Bank in March left its benchmark rate unchanged near zero. Hildebrand has said that the SNB “will not hesitate to take all measures necessary to ensure price stability in our country, also in the future.”

The Zurich-based central bank on March 17 forecast inflation to average 0.8 percent this year and 1.1 percent in 2012 before reaching 2 percent in 2013. Switzerland’s inflation rate, using a European Union harmonized method, rose 0.1 percent from a year earlier in April.

The SNB is scheduled to hold its next monetary policy assessment on June 16.

To contact the reporter on this story: Corinne Gretler in Zurich at cgretler1@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net

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