Rising fuel prices and inflation: Daniel Varela’s analysis on RTS’s 7:30 pm news
Rising fuel prices: should Switzerland fear a lasting return of inflation?
After several months marked by virtually non-existent inflation, Switzerland recorded a slight uptick in price increases in March. In the background: a rapid rise in fuel prices, a direct consequence of geopolitical tensions and developments in energy markets.
According to the latest available data, consumer prices rose by 0.3% in March, the sharpest increase observed over the past twelve months. While this rise remains moderate, it is noteworthy in a country long accustomed to very subdued inflation.
Fuel prices surge sharply over the course of a month
The rise in energy prices has been particularly visible at the pump. Over the space of just one month, prices have jumped significantly:
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+10 to 11% for unleaded petrol,
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+22% for diesel.
This situation was analysed by Daniel Varela, Chief Investment Officer at Piguet Galland, during his appearance on RTS’s 7:30 pm news programme.
No scenario of lasting inflation in the short term
According to Daniel Varela, there is no reason for alarm at this stage. The conditions for a lasting return of inflation are not in place in Switzerland.
“For inflation to become entrenched over time, second-round effects are required.”
These second-round effects refer to a very specific mechanism: an initial rise in prices—here, energy prices—that gradually spreads throughout the economy.
“Second-round effects imply a generalised increase in prices triggered by this surge in energy costs, which would then lead to higher wages and higher prices for services. And we are still a long way from that scenario.”
In other words, as long as rising energy costs do not translate into a broad-based increase in wages and service prices, the risk of sustained inflation remains limited.
🎧 Listen now to Daniel Varela's intervention (French only)
(from 12:20)
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