SNB's Schlegel: Hot Weather Affects Food Prices, Not Swiss Inflation

Swiss National Bank Chairman Martin Schlegel has said that this year's record temperatures have influenced food prices, though they have not been the force behind Switzerland's rising inflation.

In an interview broadcast on Saturday, Schlegel told radio station SRF that the SNB is keeping a close watch on how the hot weather affects food costs. "The hot summer, especially the dry summer, has had an effect on food prices — you can certainly see that there have been certain price movements," he said.

He added that policy measures have been taken to counter those effects, and that the increase in inflation is almost exclusively attributable to petroleum products.

Switzerland's annual inflation rate doubled in August to its highest level in nearly two years, prompting concerns that smaller harvests and lower water levels on transport routes such as the Danube and the Rhine could make food more expensive and push up prices more broadly.

The SNB held its benchmark interest rate at 0% on Thursday, even as other central banks raise borrowing costs to tackle inflation linked to more expensive fuel. Schlegel said the central bank could do so because it expects inflation to decline after a temporary increase and to stay within its 0% to 2% target through the end of its forecast range, which runs to mid-2029.

"We assume that the price of crude oil will come back down, and that simply means that the effect of a higher oil price at the moment gradually fades out a little over time," he said.

On the currency, Schlegel described the franc's recent decline as a minor counter-trend following years of appreciation. "There have been long periods when the franc actually became a bit stronger almost constantly," he said. "What we've just seen is a minor counter-trend."