Switzerland May-25 CPI Inflation Report
Swiss inflation in deflation territory for the first time after four years.
Key takeaways
In May 2025, the Swiss Consumer Price Index (CPI) declined by 0.1% year-on-year (YoY), compared to 0.0% YoY in April, and in line with the consensus forecast of a 0.1% YoY decline. On a month-on-month (MoM) basis, May’s CPI increased by 0.1%, just above the April’s reading of 0% MoM.
Core CPI increased by 0.5% YoY in May, versus 0.6% YoY in April. On a month-on-month basis (MoM), core CPI increased by 0.1%, the same increase as in April.
As for virtually all previous releases, the services sector remains the primary driver of rising prices, experiencing a 1.1% YoY increase in May, down from April’s 1.4% YoY figure. In contrast, the goods sector inflation declined by 1.9% YoY in May, lower than the April’s 2.0% YoY decrease.
Housing rentals have trended upward since November 2023. Since this data is adjusted quarterly, the May release differs from April’s, with an increase by 2.6% YoY – sensibly lower than the 3.2% YoY increase recorded in the period from January to April 2025.
These results are consistent with a common dichotomy faced by Central Banks in (major) advanced economies: goods prices are in a deflationary territory while service price inflation is the main contributor of overall inflationary pressures.
A parallel dichotomy arises in Switzerland by examining import and domestic prices, with import prices decreasing by 2.4% YoY in May (compared to April’s 2.5% YoY decline) and domestic prices rising by 0.6% YoY (versus 0.8% YoY in April and 1.0% in March).
Excluding housing rentals, CPI inflation declined by 0.7% YoY in May, the same decline as in April.
From the SNB's perspective, the current release and the April release confirm the very low inflation outlook that has led to the further downward revision of the conditional inflation path outlined in its latest monetary policy assessment. The Swiss National Bank (SNB) is scheduled to hold its next policy meeting on June 19. Markets widely expect a 25 bps rate cut, which would bring the policy rate back to 0%, though there is a non-negligible chance of a larger 50 bps cut. SNB Chairman Martin Schlegel has emphasized that the central bank is not focused on short-term inflation figures, noting: “The SNB does not necessarily have to react to this [i.e., negative inflation data]. Our focus is not on the current rate of inflation, but rather on price stability over the medium term.”
The recent appreciation of the Swiss Franc adds a further challenge to the inflation outlook. Since the SNB's March meeting—and following the U.S. administration’s trade policy announcement—the franc has strengthened further, particularly against the U.S. dollar and, to a lesser extent, the euro. This currency strength could reinforce deflationary pressures later in the year and influence the conditional inflation forecast of the SNB. Another important factor to consider is that additional disinflationary pressure is expected later this year, driven by a further decline in the housing rental component of the inflation index.
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Review of the Inflation Release
Consumer prices fell by 0.1% year-on-year (YoY) in May 2025, versus April’s increase of 0.0% YoY, and in line with the consensus forecast of 0.1% YoY decline. On a month-on-month (MoM) basis, consumer prices increased by 0.1% MoM, just above the 0% MoM April’s reading.
Core CPI, which excludes fresh and seasonal products as well as energy and fuels, increased by 0.5% year-on-year (YoY) in May (Chart 1), down from April’s 0.6% YoY figure. On a month-on-month basis, Core CPI increased by 0.1% MoM in May, just as in April (0.1% MoM increase).
Similar to trends seen in other advanced countries, the services sector, rather than the goods sector, is the main driver of rising prices (Chart 2). In May, services increased by 1.1% YoY, down from the 1.4% YoY figure recorded in April. Meanwhile, the goods sector experienced a decline of 1.9% YoY, above April’s 2.0% YoY decline, showing persistence in good prices deflation.
A closer look at the disaggregated data (Tables 1 and 2) confirms that, as in other advanced economies, housing rentals remain the primary driver of inflation (see Chart 3). In Switzerland, this component of the Consumer Price Index (CPI) is updated quarterly and in May it increased by 2.6% YoY down from 3.2% in the previous quarter. As discussed earlier, movements in housing rents are closely tied to the policy rate. Given the SNB’s rate cuts over the past year, the moderation in rental inflation from its August–October peak is consistent with the adjustment in the policy rate. Still, housing rentals continue to exert significant upward pressure on headline inflation. Stripping out this component, the CPI fell by 0.7% YoY in May, the same decline as in April.
Another important classification from Switzerland's perspective is the distinction between domestic and imported inflation (see Chart 4). In May, domestic inflation rose by 0.6% year-on-year, compared to the 0.8% increase YoY recorded in April. On a monthly basis, domestic inflation increased by 0.2% MoM, above April’s 0.1% MoM decline. In contrast, imported inflation decreased by 2.4% YoY in May, above the April’s 2.5% YoY drop. On a monthly basis, imported inflation stay flat at 0% MoM in May, down from April’s 0.3% MoM increase.
The Swiss Federal Statistical Office also makes available a measure of the Harmonized Price Index of Consumer Prices (The Harmonized Index of Consumer Prices (HICP) is an indicator that the member states of the EU and EFTA calculate based on a harmonized method and allows for international inflation comparisons). In May, the HICP declined by 0.2% on a year-on-year basis, lower than April’s 0.3% YoY increase.
Summary
The latest inflation report reinforces the disinflationary narrative. Goods prices continue to fall, and imported inflation is also in negative territory, contributing to the low inflation outlook. Domestic inflation has consolidated around 1.0% for four consecutive months, and the relatively higher monthly readings of the CPI at the core and domestic inflation levels are explained by the persistence in the housing rental component.
The Swiss National Bank (SNB) will hold its next policy meeting on June 19, and the latest inflation data confirm the low inflation outlook presented in the March monetary policy assessment. Taken together with the April release, the data point to a likely downward revision of the SNB’s conditional inflation forecast at the current policy rate, strengthening the case for a rate cut in June.
Although tariffs on Swiss imports remain suspended, ongoing trade tensions have led to a renewed appreciation of the Swiss franc since the last policy decision. This appreciation adds to the disinflationary pressures and further supports the likelihood of a policy easing.
While SNB Chairman Martin Schlegel has indicated that negative inflation prints are expected, the key focus will be on how the medium-term conditional inflation forecast evolves in light of recent developments.
Table 1: CPI by components (% YoY)
Source: Swiss Federal Statistical Office (FSO).
Table 2: CPI by components (% MoM)
Source: Swiss Federal Statistical Office (FSO).