Swiss National Bank’s Schlegel watching hot weather impact on food price inflation

Swiss National Bank Chairman Martin Schlegel discussed the impact of record temperatures on food prices and Swiss inflation in an interview broadcast on Saturday. While hot weather has influenced food prices, it has not been a primary driver of Switzerland's rising inflation, Schlegel stated. In August, the country's annual inflation rate doubled to its highest level in nearly two years, sparking concerns about reduced harvests and lower water levels on transport routes, such as the Danube and Rhine rivers, which could contribute to higher food costs and overall price increases.

The SNB is closely monitoring the effects of the hot weather on food prices, according to Schlegel. The hot summer, particularly the dry conditions, has indeed impacted food prices, he noted, but there are policy measures in place to counteract these effects. So far, the inflation rise has been largely driven by petroleum products.

The SNB maintained its benchmark interest rate at 0% during a meeting on Thursday, despite other central banks raising borrowing costs to address rising inflation linked to more expensive fuel. The central bank expects inflation to decline after a temporary increase and stay within its 0% to 2% target to the end of its forecast range, which extends to mid-2029, Schlegel explained.

He added that the SNB anticipates crude oil prices will eventually decrease, which would gradually reduce the impact of higher oil prices. Schlegel also pointed out that the recent depreciation of the franc is a minor fluctuation, considering decades of franc appreciation. The recent decline represents a counter-trend after years of the Swiss currency consistently strengthening.