Opinion: It seems useful to examine why, in a world of generalized high inflation, Switzerland inflation has stayed so low. More precisely, what lessons can we learn from Switzerland’s experience with inflation?
Canada’s inflation has been on the rise since early 2021. Year-over-year, CPI inflation went from 1.1 per cent in January 2021 to 4.8 per cent in December to a peak of 8.1 per cent in June 2022. Since then, it has followed a descending path, falling to 7.0 per cent in August — yet a level 3.5 times higher than the official 2.0 per cent target.
So, definitely, rising inflation is a global phenomenon. Therefore, it appears there must be some common factors simultaneously affecting inflation in all these countries. In this regard, most analysts agree these common factors include the initial supply-chain bottlenecks spurred by the pandemic, the subsequent strong recovery of the world demand for oil and other commodities, and more recently the war in Ukraine.
Unquestionably, imported inflation appears as the main determinant of today’s overall inflation. On a year-over-year basis, Swiss prices of imported products increased 8.6 per cent in August, while prices of domestic products rose only 1.2 per cent. Canada, the hike in the average price of imported products was much higher at 12.9 per cent.
One critical point where SNB monetary policy has contrasted with most other advanced economies’ central banks: until recently, its objective has been to achieve “exchange rate stability” rather than “price stability.” As a matter of fact, Swiss inflation has never been an issue, remaining most of the time below one per cent until late 2021.