ZURICH- Swiss inflation fell to its lowest level in four years in April, government data showed on Monday, making it almost certain the Swiss National Bank will cut interest rates again next month.
Consumer prices were unchanged last month compared with a year earlier, after 0.3 percent increases in February and March, putting inflation right at the bottom end of the SNB’s 0-2 percent target range.
It was the lowest annual inflation reading since March 2021, and analysts polled by Reuters had on average expected a 0.2 percent rise in prices.
Markets now see a 99 percent chance the Swiss National Bank will cut its policy rate from the current 0.25 percent at its next meeting, on June 19, and they expect the central bank to impose sub-zero borrowing costs later this year to prevent inflation going lower.
The SNB declined to comment on the data.
GianLuigi Mandruzzato, an economist at EFG Bank, expects the SNB to cut rates by at least 25 basis points in June, where it would also mention it was more active in foreign exchange markets to weaken the Swiss franc.
A stronger Swiss franc is contributing towards the low pricedevelopment by making imports cheaper.
“Persistent low inflation in Switzerland makes it certain the SNB will cut rates in June, the only question is how far it will go,” said Mandruzzato.
“Currently we expect a 25 basis point cut, along with perhaps more commentary on forex interventions. I would not be surprised if the SNB is not already intervening, and this would support the central bank’s policy further.”
SNB Chairman Martin Schlegel recently said the central bank could allow inflation to temporarily move below 0 percent or above 2 percent, but would react if price stability was threatened over the medium term.
“Putting off a necessary decision does not give you any additional room for manoeuvre,” Schlegel said last month.
