Swiss Inflation Unexpectedly Slows to Zero in SNB Setback
(Bloomberg) — Swiss inflation unexpectedly stalled in November and an underlying measure slowed to a four-year low, a setback for central bank officials just days before their final interest-rate decision of 2025.
Consumer-price growth was zero compared with a year ago, Switzerland’s statistics office said on Wednesday, citing a variety of factors. That’s the worst number in six months and down from 0.1% in October. Most economists in a Bloomberg survey anticipated a reading either matching that pace or accelerating.
The slowdown was driven by lower prices for energy and fuels as well as for imported products. Goods saw cost declines while services became more expensive. So-called core inflation, which strips out volatile elements such as energy, was 0.4% — the weakest since August 2021.
The outcome raises the prospect that the Swiss National Bank’s prediction of a pickup in inflation in the current quarter to an average of 0.4% will fail to materialize. With their rate currently at zero, policymakers would rather avoid a move further lower that could hurt the financial system, though they have pledged to do so if it’s warranted.
“Although this may reflect the past appreciation of the exchange rate and very low imported prices at the beginning of the year, the recent trend of weak inflation data will maintain pressure on the SNB to avoid the very low inflation environment becoming entrenched,” Gianluigi Mandruzzato, a senior economist at EFG in Zurich, said in a report.
Switzerland is contending with unusual volatility at present. It suffered its first quarterly economic contraction in more than two years during the third quarter under the weight of US President Donald Trump’s outsized tariffs on the country, before a trade deal with America then sent the franc to its strongest in a decade against the euro.
The currency’s strength pushes down prices by making imports cheaper, and the challenge it poses is all the tougher at a time when the Swiss inflation rate is in danger of being outside the lower end of the 0-2% range targeted by policymakers.
What Bloomberg Economics Says:
“We expect the SNB to look through the softness and hold rates on Dec. 11. We see a slow recovery ahead as energy prices stabilize. Still, downside risks are building as the headline moves close to deflation.”
—Jean Dalbard. For his SWISS REACT, click here.
Even so, for now most analysts don’t anticipate a cut to negative borrowing costs at the next quarterly decision on Dec. 11, nor do they see any such reduction in the future. A Bloomberg survey of economists shows that most expect the SNB to keep rates unchanged through 2027 and then hike them in the first quarter of 2028.
That outlook chimes with the tone from officials. They have stressed that brief periods of sub-zero inflation aren’t a problem, and SNB President Martin Schlegel repeated last month that “the bar is high” for a cut in borrowing costs into negative territory.
Any snapback in inflation may depend on a recovery of economic activity toward the end of the year. After the trade deal, tariffs are expected to be lifted this month, according to the Swiss government, but it’s unclear how long the associated effect will weigh on growth. For next year, many observers have raised their forecasts.
Consumer-price growth in the surrounding euro area remains much stronger than in Switzerland. Based on the European Union’s harmonized measure, the Swiss inflation rate was also zero in November.
–With assistance from Joel Rinneby, Harumi Ichikura and Kristian Siedenburg.
(Updates with additional details in third paragraph, economist in fifth)
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