(Reuters) - Swiss consumer prices were unchanged in June from a year ago, data showed on Tuesday, underscoring the need for the central bank to maintain its cap on the Swiss franc.
The Swiss National Bank imposed a lid on the franc at 1.20 per euro in September 2011. Strong demand was driving up the safe-haven currency, hurting the country's exporters and threatening to snuff out price growth.
Almost three years later, deflation fears remain. Tuesday's data from the Federal Statistics Office showed prices were flat on the year in June, less than the 0.2 percent rise economists had predicted in a Reuters poll. Prices fell 0.1 percent month-on-month in June. ECONCH
The primary reason for the monthly drop in prices was the beginning of sales in clothing, the statistics office said.
The price of imported goods fell by 1.0 percent compared with last year, but domestic prices rose 0.4 percent. That suggests weak price growth is not a sign of malaise in the Swiss economy, said J. Safra Sarasin economist Alessandro Bee.
"As long as inflation is positive, the inflationary fears of the SNB are contained," Bee said.
The global economy looks to be improving, Bee said. Unrest in Iraq and Ukraine could lead to spikes in oil prices, pushing up inflation in the coming months, he said.
At its quarterly policy meeting last month, the Swiss central bank stuck to its policy of capping the franc and said it was ready to take further steps if necessary after the European Central Bank eased its own policies.
The SNB raised its inflation forecast for 2014 to 0.1 percent from a previous 0.0 percent, but trimmed its inflation forecasts for 2015 and 2016 to 0.3 percent and 0.9 percent, respectively.
Separate data on Tuesday showed Swiss retail sales fell 0.6 percent in real terms in May from May a year earlier.
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