Swiss drivers see high fuel prices as global inflation takes hold

Inflation figures worldwide have been rising steadily over the past few months. As the cost of goods like fuel rises due to supply issues and bottlenecks, how could rising inflation abroad affect Switzerland?

Rates of inflation increase in US and Germany

Prices in the eurozone rose by 4,9 percent in November 2021 compared with November 2020, the highest level since records for the euro began. In Germany, inflation rose by 5,2 percent, climbing above 5 percent for the first time in 30 years. The US has also seen dramatic inflation, at around 6,2 percent.

While Switzerland is not usually affected by inflation abroad, prices are still rising. In November, prices in Switzerland rose by a more moderate 1,5 percent compared with the same period last year. Chief Investment Officer at Raiffeisen Switzerland, Matthias Geissbühler, said this was mainly due to the strength of the Swiss franc, noting that imports from Europe currently cost less, which limits inflation in a nation that imports a large number of goods.

Fuel and energy prices main drivers of inflation in Switzerland

For the Swiss public, the groups hit hardest by inflation will be drivers and homeowners. The price of fuel in Switzerland, despite being lower than in some parts of Germany, has still seen record highs. Additionally, the lack of cooperation between Switzerland and the EU has led to increased prices for energy.

Geissbühler made the case that Switzerland is better off than other nations, as the price rises are currently limited to a small number of goods. This is in contrast to the US, where prices for clothes, meat, vehicles and luxury goods have all gone up.

Inflation blamed on supply chain issues and bottlenecks

The current rise in inflation has been blamed on the global economic recovery after the COVID lockdowns, and a lack of supply with high demand. Bottlenecks, supply issues and a lack of raw materials have all contributed, with Geissbühler noting, "We are therefore dealing with both demand-driven inflation and a supply shock."

There is still heated debate among economists as to how long the current price rises will last. Some see the current inflation as temporary or “transitory”, while others, like US Federal Reserve Chairman Jerome Powell, see it as something that is here to stay. To combat this, Geissbühler predicted a rise in interest rates, starting in the US in the second half of 2022.