* CPI negative for first time in 5 years
* Annual decline biggest since December 1959
* Base effects from oil price still having impact
* Analysts do not see deflationary scenario
(Adds analyst comments, further details)
By Jason Rhodes
ZURICH, April 3 (Reuters) - Swiss consumer prices fell for the first time in five years in March, dropping by the biggest annual amount in almost 50 years, as the central bank said it would fight deflationary threats.
Consumer prices dropped 0.4 percent from a year ago in March and were 0.3 percent lower compared with the previous month, the Federal Statistics Office said on Friday, as energy, rent and transport costs slid on lower oil prices.
This drops were bigger than forecast and followed unexpected monthly and yearly rises of 0.2 percent in February. The annual decline in March was the biggest since December 1959, when consumer prices fell 0.6 percent.
"We forecast that CPI would fall into negative territory, but it is a bit surprising how sharp the fall was in March. It's predominantly due to the impact of lower oil prices," said Sarasin economist Alessandro Bee.
Economists polled by Reuters had expected a yearly rate of consumer price inflation of between -0.3 percent and +0.2 percent, with a median of 12 forecasts at -0.1 percent. They predicted the monthly figure would be flat.
Inflation has dropped quickly from a 15-year high of 3.1 percent hit last July.
"We may see some negative numbers in coming months, but our forecast for 2009 is positive overall. The risk of deflation remains, but the Swiss National Bank has already taken measures to combat this," said Credit Suisse economist Fabian Heller.
The Swiss National Bank cut interest rates to an historic low of 0.25 percent on March 12 and said it would buy foreign currencies to prevent a further appreciation of the franc and fight deflation.
SNB Vice-President Philipp Hildebrand reiterated on Thursday that the central bank would use all means to prevent a further rise of the Swiss franc as this could carry deflationary risks. His comments prompted the franc to drop against major currencies.
The SNB sees the Swiss economy shrinking by 2.5 to 3.0 percent this year, and forecasts consumer prices will fall 0.5 percent in 2009 and remain close to zero in 2010 and 2011.
"Even if we did have a negative number for the year, I don't think we'll see deflation in the sense of a deflationary outlook. Growth is still the thing to watch," Heller said.
The Swiss Purchasing Manager's Index held at a record low in March, data showed on Wednesday, highlighting that Switzerland's manufacturing sector has yet to turn the corner as the country falls into recession.
Exporters have suffered from Swiss goods becoming more expensive for foreign buyers because of an appreciation of the Swiss franc, traditionally seen as a safe haven in times of economic trouble.
"The Swiss franc will have to depreciate significantly from current levels, to at least above 1.55 against the euro for the currency to have an expansionary impact on the country's economic dynamics and prospects," said Deutsche Bank economist Henrik Gullberg.
The franc was around 1.5270 to the euro on Friday. (Additional reporting by Martin de Sa'Pinto and Lisa Jucca; editing by David Stamp)