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• In April, Swiss CPI surprised notably to the downside as CHF valuations reached their highest levels since early 2024 in real trade-weighted terms, and volatile travel-related categories also had a negative impact in April. Against the backdrop of the Swiss Franc having pared some of that previous strength, a reversal here would appear possible - however, the beta and lag of Swiss CPI to CHF valuations differ across categories and can both be difficult to track down.
• Additionally, rents will see their quarterly update in May, and the Y/Y pace in the category has ticked down the last two quarters following lower mortgage reference rates.

Swiss May CPI is scheduled to be published Tuesday June 3rd at 0730BST/0830CEST, with consensus standing at -0.1% Y/Y (0.0% prior) and 0.1% M/M. The release should be a key input for the upcoming June 16 SNB decision.

• An inline print would mean Swiss inflation leaves the SNB's target range of 0-2% for the first time since March 2021, and would bring in average Q2 inflation to date around 0.35pp below the SNB's March forecast of 0.3%.
• Our perception is that the SNB might be reluctant to lower its policy rate into negative territory already at their upcoming June 16 meeting given the hypothetical case of CPI coming in above consensus in May (which would mean CPI Y/Y remains at/above 0). Chairman Schlegel has reiterated their aversion to negative rates multiple times historically, and has recently highlighted that even sub-zero prints might be acceptable for the SNB in single months: "Even negative inflation figures cannot be ruled out in the coming months. The SNB does not necessarily have to react to this. Our focus is not on the current rate of inflation, but rather on price stability over the medium term", Schlegel said on May 27.
• This leads us to believe that the bar for an outsized 50bp cut to -0.25% in June might not be met if Swiss inflation continues to print within the SNB's target range - which, in that case, should see market expectations for such a move being pared (current odds stand at above 1/3 for a 50bp cut).

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