STIR: EUR STIRs Hold Flatter After HAwkish Retrace In Very Front End

• -20,000 TYJ5 109 puts, 3.0 vs. 111-25.5 to -26/0.06%

Chancellor of the Exchequer Rachel Reeves has been speaking at the Make UK conference in London. On the prospect of a UK-US free trade agreement, Reeves says, "I think there's every reason to be hopeful about coming to some sort of a trade deal, I'm not naive. This is not going to be an easy thing to secure for reasons that we all understand. There will have to be give and take on both sides. We absolutely recognise that, but I do think there's a big opportunity here."

• Claims that for the UK in terms of both trade and defence and security, "It is not a matter of needing to choose between the EU and the US". Says that the US 'are the UK's closest partners on defence and security, and that will continue to be the case'.  
• Reeves says that she does not want to see tariffs increase as even if the UK is not hit directly, it will suffer from slowing global trade, adding "I don't think [they] serve anyone well."
• Pre-speech focus was on the potential for announcements regarding gov't defence procurement and efforts to boost UK arms manufacturing. Says that 'I'm determined that we use defence spending to help stimulate the economy'. On 3 March the gov't outlined a 'defence industry hub for small and medium-sized enterprises' in an effort to help small businesses access the military supply chain.
• Reeves has been speaking in a Q&A. Livestream here. 

Swiss December CPI (due 07:30 GMT / 08:30 CET tomorrow) is expected to decelerate by 0.2pp to 0.2% Y/Y. Core inflation is expected at 0.7% (0.9% Jan). This is the last CPI print ahead of the upcoming SNB meeting (March 20), and market pricing for that decision suggests that the bar for any move other than a 25bps cut to 0.25% is rather high.

• A February CPI print in line with consensus would bring in average Q1 inflation to date in line with the December SNB conditional inflation forecast of 0.3%.
• Consensus for tomorrow's release is near-symmetric around the mode, with 3 analysts looking for a 0.1% print, 6 analysts looking for 0.2%, 4 analysts looking for 0.3%, and one for 0.4%.
• Rental inflation is set to see its quarterly update this month - in November (last update), its yearly rate decelerated by 0.6pp from its cycle high to 3.4% Y/Y. Local media quotes that UBS, ZKB and Raiffeisen Bank all look for rental inflation to print above 3% in 2025 overall. While existing contracts should see rent decreases this year (on the back of lower projected "reference interest rates" which are an indirect, lagged function of SNB policy rates), new contracts are expected to continue to drift upwards in price.
• The SNB has in the past also indicated that it views rental inflation as a lagged function of its policy - so focus also should be on how services excl. rents develops (dark blue bars in chart below).
• The hospitality category, which is a part thereof, has seen a general minimum wage increase by 1.1% on February 1 according to media reports - however, that 1.1% appears not excessive (considering UBS recently quoted Swiss nominal wage growth during the last 10 years at around 1%) and any wage growth should only flow into consumer prices over time. Hospitality inflation continues to run above the upper bound of the SNB's asymmetric inflation target of 2%.
• As a reminder, in January, Swiss inflation came in in line with consensus as an energy drag more than outweighed services inflation excl. rents bouncing a little from cycle lows.