Switzerland is threatened with deflation: the key rate in the country may soon become zero

Switzerland is on the verge of deflation, a prolonged decline in the general price level that could threaten the country's economy, according to the German weekly magazine Spiegel.

According to the Swiss Federal Statistical Office (FSO), inflation in the country fell to -0.1% in May 2025. In April, the indicator still remained at zero.

The last time inflation in Switzerland was negative was just over four years ago – in March 2021.

Deflation is considered dangerous for a country's economic development: the value of money increases, which reduces consumer activity and investment. People postpone spending, hoping for a further drop in prices, which triggers an economic "downward spiral."

It is noted that the decline in inflation in Switzerland is due, in particular, to the dynamics of prices for imported goods. In May, they fell by 2.4% compared to the same month last year.

The strong franc has led Swiss people to increasingly buy goods abroad. At the same time, prices for domestic goods have risen by 0.6%.

Core inflation in the country – excluding volatile food and energy prices – also declined slightly year-on-year to +0.5% from +0.6%.

The slight drop in prices in Switzerland, in turn, was expected by experts. Since September last year, the inflation rate here has not exceeded one percent, the last time it was above two percent was in the spring of 2023.

Against the backdrop of this data, experts expect that the Swiss National Bank will soon lower the key rate by 0.25% – to zero.

If deflation intensifies, the introduction of negative rates is not ruled out – the banking system may start charging a fee for storing money.

• On April 22, it was reported that Europe had almost returned inflation to normal levels. The ECB predicted 2% in the coming months.
• Inflation in France has fallen below the European Central Bank's 2% target, reaching a more than four-year low.