ZURICH (Reuters) – Inflation in Switzerland rose less than expected in November, according to official data on Tuesday, raising bets on a big interest rate cut by the Swiss National Bank next week.
Annual inflation in Switzerland rose to 0.7% in November from 0.6% the previous month, according to figures from the Federal Statistics Office. The consensus forecast of a Reuters poll of analysts had predicted 0.8%.
Compared to the previous month, consumer prices fell by 0.1%, according to the Reuters forecast.
The SNB, which targets an inflation rate between 0% and 2%, in 2024 has reduced its benchmark rate by 25 basis points three times to leave it at 1% now.
Markets are giving a 71% chance of a 50-point cut, and a 29% chance of a 25-point cut at the next SNB monetary policy meeting on December 12. Previously, the market was leaning toward a 25-point cut.
Karsten Junius, chief economist at J. Safra Sarasin, said that the risks of price stability are now on the low side and her bank predicts that the rate of 50 points will be lowered in December, from the previous forecast of 25 points.
Two more cuts of 25 basis points in March and June 2025 could follow to bring the SNB’s default rate to 0%, Junius added. After that, negative interest rates could not be withdrawn, he said, although he described it as a major obstacle.
The SNB itself has left the door open to negative rates.
The central bank could use foreign exchange intervention to fix the value of the Swiss franc and prevent foreign currency losses, Junius said. “At the moment, however, we do not see a clear and significant rise in the franc,” he added.
