Swiss Inflation Unexpectedly Slows to 0.1% in Blow to SNB

Shoppers in Geneva. Photographer: Andrew Kravchenko/Bloomberg Photo by Andrew Kravchenko /Bloomberg

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(Bloomberg) — Switzerland’s inflation unexpectedly slowed to near zero, adding pressure on the central bank to push back against the strength of its currency and boost price growth.

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Consumer prices rose 0.1% in October from a year ago, down from 0.2% in the previous month, the country’s statistics office said Monday. Economists had forecast acceleration to 0.3%, according to the median estimate in a Bloomberg survey. None had forecast a reading as low as 0.1%.

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The weak data may boost speculation that the Swiss National Bank will be forced to cut interest rates back below zero as soon as next month. A small minority of economists expect a reduction at the next scheduled meeting in December.

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One pressing problem is the franc’s haven status, which has propelled the currency to near decade-highs against both the euro and the dollar. That’s threatening to curb inflation by depressing import costs. The currency weakened slightly after the release of the latest inflation number, and was trading at 0.9292 francs per euro as of 8:49 Zurich time.

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Core inflation, which strips out volatile elements such as energy, also unexpectedly slowed last month, easing to 0.5% from 0.7%.

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The data will frustrate SNB President Martin Schlegel and his fellow officials, who have predicted that inflation will pick up at the end of this year and into 2026. They argued at their September meeting that cutting interest rates down to zero earlier this year would drive such acceleration in due course. The central bank forecasts that inflation will average 0.4% this quarter, twice the rate in the previous three months.

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Evidence that price growth isn’t picking up from the lower end of their 0-2% range may push policymakers to take more forceful steps.

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However, they are faced with two unpopular options; they can either do foreign-exchange interventions that bloat their balance sheet and irk the Americans, or the bigger step of a rate cut below zero that could hurt the financial system.

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Consumer-price growth in the surrounding euro area remains stronger than in Switzerland. Based on the European Union’s harmonized measure, the Swiss inflation rate was 0% in October.

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—With assistance from Joel Rinneby, Kristian Siedenburg and Harumi Ichikura.

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(Updates with rate-cut speculation, franc starting in third paragraph)

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