

Market Analysis
Swiss inflation has dropped to its lowest level in over three years, according to data released by the government on Thursday, leading analysts to predict that further interest rate cuts by the Swiss National Bank (SNB) are highly likely.
Consumer prices in Switzerland rose by just 0.8% in September compared to the same month last year, marking the weakest increase since July 2021, as reported by the Federal Statistics Office (FSO). Month-on-month prices also decreased by 0.3%, attributed to lower costs for petrol, housing, and holiday expenses.
In response to the subdued inflation, the SNB reduced interest rates to 1.0% last week, marking its third cut this year and signaling more reductions to come. The new chairman of the central bank, Martin Schlegel, has emphasized the importance of price stability—maintaining inflation within a target range of 0-2%—and noted that inflation risks have shifted more towards the downside.
During his first public appearance since assuming office, Schlegel indicated that the SNB is open to the possibility of lowering interest rates into negative territory. The SNB did not provide comments on the latest inflation data on Thursday.
Markets are currently pricing in an 82% chance of a 25 basis point cut at the SNB's next meeting in December, with an 18% likelihood for a more significant 50 basis point reduction.
Karsten Junius, chief economist at J. Safra Sarasin, stated that the inflation situation in Switzerland is "alarmingly weak," highlighting a decline in import prices while domestic inflation is mainly driven by rising rents. He believes that the latest figures indicate that further interest rate cuts by the SNB are warranted and anticipates a 25 basis point reduction in December, with additional cuts likely in March and possibly even in June next year.
GianLuigi Mandruzzato, an economist at EFG Bank, noted that the low inflation increases the likelihood of a 50 basis point cut in December. While he expects a 25 basis point reduction, he also acknowledged that a 50 basis point cut cannot be entirely dismissed. However, he believes the chances of the SNB policy rate bottoming at 0.50% in the first half of 2025 are steadily increasing.
Paraphrasing text from "Reuters" all rights reserved by the original author.