Consumer prices in Switzerland dropped the most in 50 years in March, raising concern over deflation. Swiss consumer prices fell 0.4% in March from last year.

According to Switzerland’s statistics office on Friday, the consumer price index also fell 0.3% in February, the first negative reading in five years, and lower than expected.

The deflation was blamed on energy, rent and transport costs all falling as a result of lower oil prices.

The Swiss franc weakened against the euro after today’s release, later erasing losses to 1.5226 at 3:22 p.m. in Zurich. The yield on the two-year Swiss note fell three basis points to 0.57 percent. Yields move inversely to bond prices.

The Swiss National Bank estimates inflation to remain close to zero in 2010 and 2011 and sees negative number for 2009. The central bank forecasts the economy to shrink up to 3% this year.

Image by yakobusan under Creative Commons.

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