By John Revill
ZURICH (Reuters) -Swiss inflation eased to its lowest level in two-and-a-half years in March, pushing the Swiss franc lower on market expectations that the reading almost guarantees another interest rate cut by the country's central bank.
Consumer prices rose by 1% from March 2023, data from the Federal Statistics Office showed on Thursday, the lowest level since September 2021 and down from 1.2% in February.
It was the 10th month running that inflation has come within the Swiss National Bank's 0-2% target range, and was lower than expected. A Reuters poll had forecast a 1.3% reading.
The franc weakened to 0.9836 versus the euro after the figures were published, its lowest level since last June.
"We already forecast two more rate cuts in June and September this year, and inflation at this level makes this almost certain," said Karsten Junius, chief economist at J. Safra Sarasin.
"The SNB seems to have the upside risk of inflation under control, but it also has to manage downside risks and avoid deflation."
The SNB declined to comment.
Switzerland has been shielded from price rises which have hit other European economies by a strong franc, with imports declining in price by 1.3% during March.
New and second-hand cars also became cheaper during the month, as did medicines and taxi journeys.
The SNB in March became the first major central bank to trim borrowing costs in the current cycle, reducing its key rate to 1.5%.
SNB Vice Chairman Martin Schlegel said last week low inflation pressure had enabled the rate cut, and analysts polled by Reuters expect more to follow this year.
Month-on-month prices did not change, the data showed.
Still, UBS economist Maxime Botteron said the data was too early to sway the SNB's next policy decision in June.
"The SNB will look more at the inflation situation in May ....because then there will be the impact of increased rents in Switzerland," he said.
"The SNB will also consider what the ECB and the Fed do," said Botteron, who expects the SNB to cut rates to 1.25% in June and 1% in September.