Although the Swiss National Bank has maintained a policy of currency intervention, (the purchasing or selling of currency on the exchange market by the monetary or fiscal authority for the purpose of influencing the value of the domestic currency) it has been reported that annual Swiss inflation has fallen to the lowest rate in almost 3 years. June’s Consumer Price Index for was down 1.1% from the prices of the same month in the previous year. This result was lower than that expected by analysts’, who had predicted the inflation rate to stay at -1.0%. June’s Customer Price Index was 0.3% lower than May, a month in which prices generally remained constant.
Reports from the Swiss Statistics office indicate that although the prices of tobacco and alcohol rose in June by 1.0%, clothing prices saw a drop, down by 2.8%.
This rise in deflation has arrived during a time in which the Swiss National Bank is in the process of combating the over strengthening of the CHF against the EUR, with a 1.2000 EURCHF floor. Recently, after service as the interim chairman and demonstrating commitment to enforcing the floor, Thomas Jordan was appointed the chairman of the Swiss National Bank. Concerns over the effect of inflation can be briefly set aside, as the rising deflation allows the Swiss National Bank to continue buying foreign currencies.
Despite the unexpectedly strong deflation the CHF remains comparatively steady against the USD. After yesterday’s announcement, where the European Central Bank confirmed speculations that the interest rate for the EUR would be cut, USDCHF saw a significant rally.
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