After two years of rising prices, inflation in Switzerland fell to a new low at the end of 2024. The latest consumer price data from the Federal Statistical Office (FSO) has revealed that annual inflation dropped to 0,6 percent in December, driven by cheaper goods from abroad.

Inflation in Switzerland drops again

According to the data, annual inflation fell from 0,7 percent in November to 0,6 percent in December 2024, the lowest rate reported since before the COVID-19 pandemic. After 2022 and 2023 saw prices rise at their fastest rate for decades, the rising cost of living has slowed significantly in the last year. 

The annual average inflation rate for 2024 as a whole has now been set at 1,1 percent, significantly lower than the 2,8 percent and 2,1 percent reported in 2022 and 2023 respectively. The corresponding consumer price index - which charts the cost of living for residents - also fell by 0,1 percentage point in December last year.

Which products are getting cheaper in Switzerland?

The FSO noted that while goods produced in Switzerland are 1,5 percent more expensive than they were a year ago, imported goods are 2,2 percent cheaper. In the last year, the cost of household furniture (-2,3 percent), fuel (-1,9 percent), clothing (-1,4 percent), groceries (-0,9 percent), medicine (-0,8 percent) and mobile phones (-0,1 percent) have all gotten cheaper.

These price cuts were offset by significant rises in the cost of energy and renting a house or apartment, with prices increasing by 3,4 percent in the last year. With the shortage of housing in Switzerland expected to continue into 2025, prices are set to rise further in future. Price rises were also felt in hotels and restaurants (2,1 percent), on holidays (1,1 percent) and in education (0,8 percent). 

It also needs to be noted that while price rises may be slowing in general, most products remain more expensive than before the pandemic. Flying, for example, was nearly 30 percent more expensive in November 2024 than in November 2019. Looking ahead, flag carrier airline SWISS told Watson that with the cost of salaries, air traffic control and security at airports on the rise, "average prices will continue to be higher than before the pandemic."

How will lower inflation affect life in Switzerland in 2025?

Nevertheless, the lower inflation rate should relieve residents after two years of rising prices, especially as real wages are expected to increase in 2025. Those looking to buy a house will also benefit from record-low mortgage interest rates, while tenants should see at least one drop in the reference interest rate this year, which will allow them to apply for a rent reduction.

In fact, in the last year, the Swiss National Bank (SNB) has repeatedly cut key interest rates to boost economic growth and prevent the country from falling into deflation. Between March 2024 and December, the SNB cut rates from 1,75 to 0,5 percent. Now, banks have predicted that the rate could fall to zero or even into the negatives in the next year - a situation where mortgage providers and banks pay you for holding debt. 

Despite the SNB's best efforts, deflation remains a possibility. Though positive for consumers as prices do fall, the phenomenon is a catastrophic and vicious cycle for local businesses, who will be forced to lay off workers to afford the lower prices, who then can’t afford the goods as they are unemployed. Writing to Watson, bank J. Safra Sarasin blamed the looming crisis on the fact that many of Switzerland’s major customers for goods, Germany especially, are in the midst of their own financial crises.

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