Swiss inflation accelerated more than economists forecast to the fastest pace in almost 15 years in May, led by rising energy costs.
Swiss consumer prices rose 2.9 percent from a year earlier after increasing 2.3 percent in April, the Federal Statistics Office in Neuchatel said today. That's the highest rate since October 1993. Economists forecast inflation of 2.4 percent, according to the median of 19 estimates in a Bloomberg survey.
A surge in oil prices to a record $135.09 a barrel on May 22 is pushing up inflation and draining consumers' purchasing power just as economic growth cools. Central bank President Jean-Pierre Roth said May 23 that inflation could pose a real problem if it becomes entrenched in the economy.
"We're already working on revising up our inflation forecast for this year,'' said Patrick Muhl, a senior economist at Credit Suisse Group AG in Zurich. "We still expect the Swiss National Bank to keep interest rates on hold, but there are increasing risks that they'll raise the benchmark further.''
Crude oil prices have gained 33 percent this year, adding to pressure on companies to pass on higher costs to shore up earnings. Ciba Specialty Chemicals AG, the maker of Ferrari red car-paint pigment, cut its annual earnings forecast in April partly because of rising raw-material costs.
Franc Gain
From April, consumer prices increased 0.8 percent, the largest month-on-month gain since October 2007. Heating oil prices rose 58 percent from a year earlier and gasoline was 7.5 percent more expensive. Diesel prices rose 21 percent from May 2007. The cost of beef increased 5.5 percent.
Excluding prices of food, beverages, seasonal goods, energy and fuel, consumer prices rose 0.3 percent in the month and 1.4 percent from a year earlier, the statistics office said.
The Swiss franc gained against the euro after the inflation report, rising to 1.6068 from 1.6119 yesterday.
The currency's 8.9 percent gain against the dollar this year has helped shield the economy from surging energy costs by taking the sting out of higher import prices. Against the euro, the franc has appreciated 2.8 percent since January.
Foreign Pressure
Still, the increase in Swiss consumer prices is due more to foreign than domestic pressures. Imported goods were 1.8 percent more expensive than in April and cost 6 percent more than in May last year, today's report showed. Prices of Swiss-made products rose 0.4 percent from April and 1.6 percent in the year.
The Zurich-based SNB aims to keep annual gains in consumer prices just below 2 percent. Its next meeting to decide interest rates is on June 19.
At its last meeting in March, the SNB left its key rate at a six-year high of 2.75 percent and forecast inflation will average about 2 percent this year. Roth said last month the bank faces the challenges of bolstering growth and containing inflation. Vice President Philipp Hildebrand said May 22 that the room to maneuver with respect to interest rates has decreased.
"Concerns about higher inflation have emerged as the main worry for the Swiss National Bank,'' Allan Monks, an economist at JPMorgan Chase & Co. in London, said before today's report.
With the economy losing momentum, companies may find it more difficult to pass on higher costs. Swiss leading economic indicators declined to the lowest in five years in May and manufacturing slowed for a third month.
Investors have already raised expectations of the SNB raising borrowing costs this year, futures trading shows. The implied rate on the three-month Liffe contract expiring in December traded at 3.03 percent today, up from 2.87 percent on May 1.
Swiss consumer prices rose 2.9 percent from a year earlier after increasing 2.3 percent in April, the Federal Statistics Office in Neuchatel said today. That's the highest rate since October 1993. Economists forecast inflation of 2.4 percent, according to the median of 19 estimates in a Bloomberg survey.
A surge in oil prices to a record $135.09 a barrel on May 22 is pushing up inflation and draining consumers' purchasing power just as economic growth cools. Central bank President Jean-Pierre Roth said May 23 that inflation could pose a real problem if it becomes entrenched in the economy.
"We're already working on revising up our inflation forecast for this year,'' said Patrick Muhl, a senior economist at Credit Suisse Group AG in Zurich. "We still expect the Swiss National Bank to keep interest rates on hold, but there are increasing risks that they'll raise the benchmark further.''
Crude oil prices have gained 33 percent this year, adding to pressure on companies to pass on higher costs to shore up earnings. Ciba Specialty Chemicals AG, the maker of Ferrari red car-paint pigment, cut its annual earnings forecast in April partly because of rising raw-material costs.
Franc Gain
From April, consumer prices increased 0.8 percent, the largest month-on-month gain since October 2007. Heating oil prices rose 58 percent from a year earlier and gasoline was 7.5 percent more expensive. Diesel prices rose 21 percent from May 2007. The cost of beef increased 5.5 percent.
Excluding prices of food, beverages, seasonal goods, energy and fuel, consumer prices rose 0.3 percent in the month and 1.4 percent from a year earlier, the statistics office said.
The Swiss franc gained against the euro after the inflation report, rising to 1.6068 from 1.6119 yesterday.
The currency's 8.9 percent gain against the dollar this year has helped shield the economy from surging energy costs by taking the sting out of higher import prices. Against the euro, the franc has appreciated 2.8 percent since January.
Foreign Pressure
Still, the increase in Swiss consumer prices is due more to foreign than domestic pressures. Imported goods were 1.8 percent more expensive than in April and cost 6 percent more than in May last year, today's report showed. Prices of Swiss-made products rose 0.4 percent from April and 1.6 percent in the year.
The Zurich-based SNB aims to keep annual gains in consumer prices just below 2 percent. Its next meeting to decide interest rates is on June 19.
At its last meeting in March, the SNB left its key rate at a six-year high of 2.75 percent and forecast inflation will average about 2 percent this year. Roth said last month the bank faces the challenges of bolstering growth and containing inflation. Vice President Philipp Hildebrand said May 22 that the room to maneuver with respect to interest rates has decreased.
"Concerns about higher inflation have emerged as the main worry for the Swiss National Bank,'' Allan Monks, an economist at JPMorgan Chase & Co. in London, said before today's report.
With the economy losing momentum, companies may find it more difficult to pass on higher costs. Swiss leading economic indicators declined to the lowest in five years in May and manufacturing slowed for a third month.
Investors have already raised expectations of the SNB raising borrowing costs this year, futures trading shows. The implied rate on the three-month Liffe contract expiring in December traded at 3.03 percent today, up from 2.87 percent on May 1.
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