In October, Swiss inflation fell to its lowest level in three years, indicating further interest rate cuts by the Swiss National Bank, according to Reuters.
Consumer prices in Switzerland rose 0.6 per cent in October from the same month a year earlier, data from the Federal Statistics Office showed. The price rise was the lowest since July 2021, reflecting cheaper food, clothing and household goods.
Markets are now giving a 72% probability that the central bank will cut rates from 1 per cent at its next meeting on 12 December to 0.75 per cent. Analysts argue that rates could fall again next March to 0.5 per cent. Karsten Junius, an economist at J.Safra Sarasin, said:
The situation with falling inflation is becoming uncomfortable for the SNB, which will certainly cut rates by 25 basis points in December, although I wouldn’t be surprised if they cut by 50 basis points. But I think it will prefer to keep something in reserve and cut rates again by 25 basis points in March and another 25 basis points in June to get to 25 basis points.
GianLuigi Mandruzzato, an economist at EFG Bank, noted that October inflation was well below the latest SNB forecast for inflation of 1 per cent in the fourth quarter.
The data also raises the chances that the SNB will consider a larger rate cut of 0.5% instead of the standard 0.25% cuts implemented since March as the risk of negative inflation in 2025, if only temporarily, has clearly risen.
