- Switzerland August CPI +0.4% vs 0.0% m/m expected (Prior -0.1%)
- Switzerland August CPI +0.8% vs +0.5% y/y expected (Prior +0.4%)
- Switzerland August core CPI +0.4% y/y (Prior +0.3%)
The surge in petrol prices was the key factor driving up Swiss inflation in August, with that seen 25% higher compared to the same month a year ago. As such, headline annual inflation is seen doubling in August compared to July.
However, there was only a slight increase in core annual inflation. And this is the more important metric, one that the SNB looks at more closely to decide on monetary policy setting.
For now, the big picture outlook remains that Switzerland is still sitting very close to the bottom of the SNB’s 0% to 2% definition of price stability. So, they are not in a hurry to move on policy in order to address the inflation situation – unlike most major economies.
The key complication for the SNB at the moment is the franc currency itself. As a safe-haven currency, renewed geopolitical tensions can drive further appreciation in the franc. And that in turn lowers import prices and suppresses inflation further. That means policymakers may remain more concerned about excessive franc strength and renewed disinflation than about an imminent inflation problem.
In short, the message is rather straightforward: Swiss inflation is low, policy is already neutral at 0%, and so the bar for either another cut or a rate hike remains high.
