Swiss franc worth its weight in gold as hedge against inflation, experts suggest

Swiss franc worth its weight in gold as hedge against inflation, experts suggest

As prices continue to rise across the world, some financial experts have suggested Swiss francs are now “better than gold” as a hedge against inflation. Gold, as a precious metal with a limited supply, has historically been used by investors to avoid losing money during times of financial turbulence, since commodities rarely lose as much value.

What is Switzerland doing to combat rising prices?

While other nations in Europe saw inflation rise by as much as 8,8 percent in May 2022, prices in Switzerland rose by just 2,9 percent. Even with this comparatively small jump in inflation, Swiss banks and the federal government are deeply concerned, as the first seven months of 2022 have seen the highest levels of inflation recorded in Switzerland since 2008.

In response, the Swiss National Bank (SNB) increased interest rates from -0,75 to -0,25 percent in an attempt to combat inflation. This rise in interest rates caught the eye of the Deutsche Bank, one of the major banks in Germany, which declared that Switzerland’s national currency is now “better than gold” as a hedge against rising prices.

Robin Winkler, currency analyst at Deutsche Bank, told the British Daily Telegraph that the Swiss interest rate hike was a surprise for many, adding, “The signal to the market is even clearer... the SNB now desires a stronger Swiss franc. The rationale is clear: to prevent the transmission of excessive inflation into Switzerland from the Eurozone.”

Inflation and price rises in Switzerland 

Even though prices in Switzerland are rising, especially for those looking to buy a house and those burdened by utility bills, the country seems to be somewhat immune to the high figures of inflation seen elsewhere in Europe. 

Nannette Hechler-Fayd'herbe, Global Head of Economics and Research at Credit Suisse, told Reuters that one of the reasons the country sees lower inflation than elsewhere is simply because Switzerland is so expensive already. "One of the aspects of Switzerland is that we tend to have high prices for practically everything when you compare it with our neighbours in Europe," she said. Salaries in Switzerland are also higher than elsewhere in Europe, meaning that, for the time being, there is less pressure for salaries to rise as well. 

Another key and often overlooked factor in Switzerland’s lower inflation figures is the country’s reliance on hydropower for around 60 percent of its energy, making it less vulnerable to volatility in the oil and gas markets. Couple this with a strong Swiss franc and it is easy to see why foreign investors are wishing they were in Switzerland right now.



Emily Proctor

Former Editor at IamExpat Media.

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