* Swiss CPI falls 0.3 pct y/y, forecast was for 0.6 pct drop
* CPI rises sharply m/m on higher shoe, clothes prices
* Core inflation remains stable
* Analysts see no deflation, but too early for an all-clear
(adds details, analysts' comments, background)
By Sven Egenter
ZURICH, May 7 (Reuters) - Swiss consumer prices fell less than expected on the year in April as retailers raised prices for shoes and clothes, dampening fears of deflation that have prompted the central bank to take drastic policy measures.
Economists cautioned, however, against an all-clear as the economic slump was spreading to more and more sectors and unemployment was rising, heralding further pressure on prices.
Consumer prices fell 0.3 percent from a year ago, but they rose 0.9 percent compared with March, the Federal Statistics Office said on Thursday. In a Reuters poll economists had expected a year-on-year price decline of 0.6 percent after a fall of 0.4 percent in March, the sharpest yearly decline in 50 years.
BNP Paribas analyst Eoin O'Callaghan said prices were set to fall in the coming months, mainly due to the reversal of last year's the strong oil and food price increases.
"In addition, core inflation should continue to trend down over the coming months as the weak economy and strong exchange rate weigh on prices," he said.
In April, core inflation, stripping out volatile price components like food, beverages, tobacco, seasonal products, energy and fuel stayed unchanged at 1.1 percent and even ticked up to 1.5 percent when also taking out administered prices.
Prices for shoes and clothes jumped nearly 18 percent on the month and rose 2.8 percent compared to April 2008. Food was 1.3 percent more expensive than a year ago. Prices for oil products dropped 29 percent on the year.
UNCONVENTIONAL
Deflation fears have gripped Switzerland as the economy faces its worst recession since 1975.
The central bank, which forecast the economy to shrink by up to 3 percent and prices to fall by 0.5 percent this year, has taken drastic steps to avert deflation.
The Swiss National Bank cut its target for the 3-month Swiss franc LIBOR to a record low of 0.25 percent, intervened in the foreign exchange market and started buying corporate bonds.
Economists said the SNB was now likely to wait and assess the effects of the steps before deciding on further moves as a deflationary spiral was not on the cards yet despite the risks and first signs of stabilisation appeared in the economy.
Nevertheless, most saw the central bank sticking to its unconventional policy for quite a while.
"The SNB has made clear that they will stick to their intervention policy 'resolutely' as long as the downside risks to growth and the risk of deflation exists," 4Cast analyst Saara Tuuli said.
"We expect the SNB's unconventional policy measures to remain at play throughout and interest rates to remain near zero for much of 2009/2010," she said.
(Reporting by Sven Egenter; Editing by Ruth Pitchford and Andy Bruce)