Swiss prices rise for second month in a row in December

Fri Jan 10, 2014 4:51am EST

* Swiss CPI at 0.1 pct y/y in Dec, unchanged from Nov

* Prices rise y/y for second month in a row

ZURICH Jan 10 (Reuters) - Swiss annual inflation hovered in positive territory for the second month running in December, official data showed on Friday, underscoring the success of the Swiss National Bank's policy of capping the franc to ward off deflation.

The SNB capped the Swiss franc at 1.20 per euro in September 2011 to protect the economy from deflation and recession after the safe-haven unit made large gains.

Prices rose 0.1 percent on the year last month, having risen for the first time in more than two years in November, the Federal Statistics Office said. The reading fell just short of economists' expectations for a 0.2 percent rise.

"The SNB can ... congratulate themselves that their policies, including the 1.20 Swiss franc cap, are very slowly working," said Global Informa Markets analyst Tony Nyman, adding the reading was unlikely to have an impact on policy.

Prices fell 0.2 percent month-on-month in December, mainly due to lower prices for medicine, package holidays, clothing and shoes, the statistics office said.

The average annualised inflation rate in 2013 was -0.2 percent, it said.

The inflation reading adds to a series of upbeat economic data such as Switzerland's leading KOF indicator, which showed the Swiss economy may gain momentum in the first half of 2014.

Data, along with signs of a recovering global economy, have led some economists to question whether the cap may prove increasingly unnecessary.

Earlier this week, SNB Chairman Thomas Jordan reiterated the importance of the franc cap to monetary policy, saying it was the correct tool for ensuring appropriate monetary conditions for the foreseeable future.

Core inflation, which strips out more volatile components such as food and beverages, seasonal products, energy and fuel, was flat on the year in December, compared to 0.1 percent in November. (Reporting by Alice Baghdjian, editing by Elizabeth Piper)

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