- July CPI +0.4% vs +0.4% y/y expected
- Prior +0.5%
- July core CPI +0.3% y/y
- Prior +0.3%
Swiss inflation continues be rather benign with the monthly estimate even showing a 0.1% decline in headline inflation. With core annual inflation also keeping steady and continuing to keep closer to 0% than 1%, the big worry for the Swiss economy remains a return to deflation.
And that is the main risk that the SNB will also be looking to avoid. For now, higher price pressures globally may keep the central bank from needing to take any immediate action. However, a stronger Swiss franc currency will continue to pile on the pressure in the bigger picture.
As such, the Swiss central bank cannot rest on its laurels in pushing back against such strength in the currency. Otherwise, they risk falling back into the deflation rabbit hole. And when that happens, it is only a matter of time until we start to see unconventional monetary policy tactics return to the fray.
As much as policymakers would want to avoid that, they might be left with very little choice at the end of the day. NIRP and QE. Two words that will soon make a comeback in Switzerland it would seem.
This article was written by Justin Low at investinglive.com.
