(Bloomberg) -- Swiss inflation unexpectedly slowed to a two-year low, adding to the case for Swiss National Bank officials to keep borrowing costs steady when they meet next week. 

Consumer prices rose 1.4% in November from a year earlier, the weakest since October 2021. That was lower than predicted by any economist in a Bloomberg survey, which foresaw no change from 1.7%. The drop was driven by lower costs for hotels, package holidays, fuel and fruit and vegetables.

The so-called core gauge, which strips out volatile elements like energy and food, also decelerated to 1.4%, the Swiss statistics office said Monday.

With Switzerland’s inflation rate keeping within the central bank’s target range of between 0 and 2%, the SNB paused its hikes in September, but stuck to a forecast that saw price growth breaching the target range all of next year. The slowdown has now prompted economists to find this prospect increasingly unlikely.

“The winter rebound is canceled,” said Bantleon AG senior economist Joerg Angele. “With October and November readings so much lower than expected, I don’t see any other way than the SNB visibly cutting its forecast next week.” 

Angele, who expects prices growing around 1.5% next year, added that the central bank “can consider its mission of anchoring inflation in its target range as accomplished.”

EFG Asset Management economist GianLuigi Mandruzzato said that “SNB policy rates have peaked for this cycle and that the scope for rate cuts will likely increase during 2024.”

Deflecting any discussion about cutting, officials led by President Thomas Jordan have so far been careful to stress that more tightening might be required.

“We can’t yet declare that inflation has been completely defeated,” Jordan said in an NZZ interview late last month. “There is great uncertainty about future developments.”

The SNB lists higher costs of electricity, rents and public transport as price drivers, combined with a boost in value-added tax. Power costs alone are set to rise an average 18% in January, which is however less than their increase one year before.

Swiss consumer-price growth remains lower than many advanced economies, showcasing how the country’s strong currency has sheltered it from the ravages of inflation elsewhere. 

Euro-area data last week revealed that price growth dropped to 2.4% there. Based on the European Union’s harmonized measure, Swiss inflation was 1.6% in November.

Switzerland’s economy has also fared more comfortably that its neighbors. Gross domestic product increased 0.3% in the third quarter, and the OECD predicts it will expand 0.8% this year. That’s ahead of the 0.6% forecast for the euro area, which contracted in the three months through September. 

--With assistance from Kristian Siedenburg, Joel Rinneby and Sonja Wind.

(Updating with economist comments from fourth paragraph)

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