(RTTNews) - Swiss consumer price annual inflation eased more than predicted in November to the lowest since October 2007.

The Federal Statistical Office said in its report released on Tuesday that annual inflation slowed to 1.5% in November from 2.6% in October. The November rate was the slowest since October 2007. Economists had expected the inflation rate to ease to just 2%.

Driven by lower oil prices, consumer prices dropped 0.7% month-on-month in November, while economists were looking for a 0.2% fall. In October, prices were up 0.5%.

Transport cost slid 3.5% on a monthly basis and housing and energy charges were down 0.6%. Prices of food and non-alcoholic beverages dropped 0.5%. On the other hand, the health index edged up 0.1%, which was mainly due to expensive drugs.

On November 20, the Swiss central bank had reduced its key interest rate massively in an unexpected move as growth as well as inflation slowed. The central bank had lowered its target range for the three-month Libor by a record 100 basis points to 0.5%-1.5% in its third unscheduled move since the start of October.

The central bank said inflation would ease in the months ahead due to declining prices of raw materials and oil. Hoping to restore price stability sooner than expected, the SNB said inflation is likely to fall below 2% as early as the end of this year.

The think tank KOF said the economic barometer fell into negative territory in November, signaling that Swiss economic growth is likely to be flat in the coming months.

According to economic outlook report released by the Organization for Economic Co-operation and Development, Swiss economic activity is expected to contract somewhat in 2009, due to poorer prospects and a diminished contribution of financial services. Before recovering in 2010, the economy is expected to contract 0.2% next year. The OECD finds need for further rate cuts, but monetary policy stimulus would have to be withdrawn in the course of 2010.

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Posted in Categories: Economy, Forex, Releases, Switzerland, USA.

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