04.06.2025

Core Inflation Rate in May as an Indicator for the SNB Interest Rate Meeting

Core Inflation Rate in May as an Indicator for the SNB Interest Rate Meeting

The publication of consumer prices in Switzerland, particularly the core inflation rate, is of significant importance for the decisions of the Swiss National Bank (SNB). In May 2025, the core inflation rate fell to 0.5 percent, representing a decrease of 0.1 percentage points compared to the previous year’s value. This development could be crucial for the upcoming SNB interest rate meeting, as it provides indications for future monetary policy.

Importance of the Core Inflation Rate

The core inflation rate measures price developments excluding the volatile components such as energy and food. It is considered an important indicator of the underlying inflation dynamics. A declining core inflation rate could suggest that inflation is not rising as strongly as expected, which could lead the SNB to refrain from increasing its rates or even to lower them to support the economy.

Current Inflation Development in Switzerland

In May 2025, the overall inflation rate in Switzerland was -0.1 percent, indicating slight deflation. This marks the first time since March 2021 that inflation has been negative. Prices for imported goods fell by 2.4 percent, while prices for domestic goods increased by 0.6 percent. The national consumer price index (LIK) rose by 0.1 percent in May to 107.6 points, attributed to higher rental prices and package tour prices.

Impacts on the SNB Interest Rate Meeting

The SNB closely monitors inflation developments to adjust its monetary policy. A low or negative inflation rate could prompt the SNB to lower its interest rates to strengthen the economy and combat deflation. On the other hand, a stable or rising core inflation rate could indicate that the SNB needs to keep its rates stable or even increase them to keep inflation in check.

Relevance for Investors in the German-speaking Region

For investors in the German-speaking region, the decisions of the SNB are significant as they can impact capital markets and the economy. A rate cut could increase demand for Swiss bonds and weaken the Swiss franc, which could be advantageous for exporters. Conversely, a rate increase could strengthen the Swiss franc and enhance the attractiveness of Swiss bonds.

In summary, the core inflation rate in May is an important indicator for the future monetary policy of the SNB and has significant impacts on the economy and investment decisions in the German-speaking region.