Swiss annual inflation dipped to 2.2% as expected in May, government data showed on Monday, although the Swiss National Bank is still expected to raise interest rates later this month.

The year-on-year increase in consumer prices reported by the Federal Statistics Office was below the 2.6% rate in April and in line with the 2.2% forecast in a Refinitiv poll.

Although modest compared to other countries, many of which have seen double-digit price growth, Swiss headline inflation has remained above the central bank's 0-2% target range since February 2022.

"Inflationary pressures remain relatively broad based and the May CPI release will not change that," said Credit Suisse economist Maxime Botteron.

"In that context, a rate hike by the SNB is highly likely in June," he said, adding he expected the SNB to raise its policy rate by 50 basis points to 2% as "inflation will likely remain on the upper end of the definition of price stability over the next few quarters."

J.Safra Sarasin economist Karsten Junius also expects a rate hike, although by a more modest 25 basis points, as there appeared to be only moderate pressure from higher wages.

"Second-round effects of last year's inflationary push are not as strong as in most other countries," Junius said. "The SNB will therefore not have to raise its key rates as sharply as in the euro area."

The SNB declined to comment on Monday. Last week Vice Chairman Martin Schlegel said the bank remained ready to raise rates and Chairman Thomas Jordan last week raised concerns about entrenched inflation.

The SNB has increased interest rates four times over the past year and the market currently expects a further 25 basis point increase from the current 1.5% level when it makes it next assessment on June 22.

Month-on-month, Swiss prices increased by 0.3%, mainly attributed to more expensive rents and package holidays, the Federal Statistics Office said. Vegetables also became dearer.

Annual core inflation, which strips out volatile items like fuel and food, was 1.9% down from 2.2% in April. (Reporting by John Revill Editing by Tomasz Janowski)