Swiss Inflation Holds Steady at 0.0% YoY in April Amid Sectoral Divide and Global Trade Tensions

The Swiss national bank (SNB) reported that the Consumer Price Index (CPI) rose by 0.0% year-on-year (YoY) in April 2025, marking a slight moderation from March’s 0.3% increase. This stability reflects a fragile equilibrium between persistent services-sector inflation and deepening deflation in goods and imported items. However, looming global trade disruptions—most notably a 32% U.S. tariff on Swiss exports—threaten to destabilize this balance, casting a shadow over the Swiss economy’s outlook.

Key Trends in April’s CPI Data

The April CPI print aligns with a disinflationary trajectory that has defined Switzerland’s economy since late 2023. While services prices remain the primary inflation driver, their growth has slowed to 1.5% YoY, down from 1.6% in March. Meanwhile, the goods sector continued its deflationary slide, contracting by 1.8% YoY, the steepest decline since mid-2024. The core CPI (excluding volatile items like energy and food) edged down to 0.8% YoY, underscoring broader price stability.

The housing rentals component, which accounts for 27% of the CPI basket, grew by 3.1% YoY in April, a slight moderation from March’s 3.2%. Excluding this, the CPI would have dipped into negative territory, declining by 0.4% YoY—a clear sign that Switzerland’s inflation resilience hinges on this single factor.

Sectoral Divide and Global Trade Pressures

The SNB’s April report highlighted a stark domestic vs. imported inflation split. Domestic inflation—prices of goods and services produced in Switzerland—held steady at 1.0% YoY, while imported inflation worsened to -1.8% YoY, driven by a stronger Swiss franc and cheaper global inputs. This divergence reflects the dual forces of global deflationary pressures and Switzerland’s accommodative monetary policy, which has kept the franc elevated against the euro and dollar.

The U.S. tariff shock, set to take full effect in May, adds complexity. The 32% levy on Swiss exports—applied atop an existing 10% tariff—could weaken Swiss firms’ competitiveness in the U.S. market while making imported U.S. goods cheaper for Swiss consumers. This could further drag down imported inflation while squeezing corporate profit margins.

SNB Policy Outlook and Risks Ahead

The SNB’s next policy meeting in June will scrutinize the tariff’s impact on inflation and the trade balance. While the central bank has maintained its -0.75% policy rate since 2024, it faces a dilemma: lower inflation reduces urgency for rate hikes, but the tariff’s uncertainty may necessitate preemptive action.

Investors should also monitor the CHF/EUR exchange rate, which has hovered near 1.06 since February 2025. A stronger franc could amplify imported deflation but also hinder exporters already struggling with U.S. tariffs.

Implications for Investors

1. Equity Markets: Swiss exporters (e.g., pharmaceuticals, machinery) face headwinds from tariffs and a strong franc. Conversely, domestic services sectors like healthcare and hospitality may benefit from stable pricing power.
2. Fixed Income: The Swiss government bond yield curve has flattened as markets price in low inflation. Investors in 10-year CHF bonds (currently yielding ~0.8%) may prioritize capital preservation over yield.
3. Currency Plays: Shorting the CHF against inflation-linked assets like gold or commodities could hedge against tariff-driven volatility.

Conclusion: A Delicate Balance

Switzerland’s CPI stability at 0.0% YoY in April masks deeper divides between its domestic services sector and globally exposed goods industries. While the SNB’s accommodative policy has supported housing rents and local services, external threats—from U.S. tariffs to global deflation—are testing this equilibrium.

Historical context reinforces the fragility of this balance: the CPI’s 2025 projection of 1.1% YoY depends on avoiding a “tariff shock” that could push inflation further downward. Investors must weigh Switzerland’s structural resilience against escalating trade risks. For now, the SNB’s cautious stance and the CPI’s flatline offer fleeting comfort—a pause before the next chapter of economic crosscurrents unfolds.

In this environment, diversification across sectors and currencies, paired with close monitoring of trade data, remains the safest strategy. The Swiss economy’s next move hinges on whether global tensions or domestic stability will prevail.

Ask Aime: Will Swiss National Bank's recent CPI report affect the stock market?