Swiss inflation falls once more, pointing to extra central financial institution fee cuts

By John Revill

ZURICH (Reuters) – Swiss inflation fell once more in December, in line with information on Tuesday, fuelling expectations for extra rate of interest cuts by the Swiss Nationwide Financial institution this yr that markets now view as just about sure.

Swiss costs rose by 0.6% in December in contrast with a yr earlier, in line with figures from the Federal Statistics Workplace, down from 0.7% in November.

The determine was in step with a consensus forecast in a Reuters ballot of analysts and was the fourth month in succession wherein annual inflation was beneath 1%.

Following the info, market expectations for a 25 foundation level minimize by the SNB in March, from the present 0.5% degree, rose to 98.4% from 91% beforehand.

“One other rate of interest minimize by the SNB in March is now just about sure,” mentioned GianLuigi Mandruzzato, an economist at EFG Financial institution.

“The query is simply how a lot – will the SNB go for 50 foundation level minimize like they did in December or persist with 25 foundation factors to fend off the danger of too low inflation for too lengthy.”

Adrian Prettejohn at Capital Economics additionally anticipated one other fee minimize by the SNB in March, as disinflationary pressures intensify, and wouldn’t rule out additional cuts.

Month on month, Swiss costs fell by 0.1%, in step with forecasts, as greens and worldwide holidays grew to become barely cheaper.

Consequently, Swiss inflation throughout 2024 averaged 1.1%, nicely throughout the SNB’s goal vary of 0% to 2%.

The SNB declined to touch upon the newest inflation data.

Though December’s studying was unlikely to alter the SNB’s calculations by itself, one other weak studying pointed to extra fee cuts by the SNB in 2025 after 4 cuts in 2024, mentioned Gero Jung, chief economist at Mirabaud, a Swiss financial institution.

“The SNB is worried about sturdy disinflationary dangers, bringing the general inflation fee near zero, but additionally the weak point of the eurozone financial system, which can have an effect on Switzerland,” mentioned Jung, who expects the SNB to chop charges by 25 foundation factors in each March and June to take its coverage fee to 0%.