SWITZERLAND: Soft CPI Print Unlikely to Tilt SNB Closer to Cuts (1/2)
Jan-07 12:52
Tomorrow's events in Switzerland, December CPI and the SNB summary of the December meeting, are likely to confirm that near-term moves in policy rates in any direction are not on the table for now.
December CPI (0730GMT/0830CEST) is expected to show a marginal acceleration to 0.1% Y/Y following November's downward surprise to 0.0%. A print in line with consensus would bring in Q4 inflation roughly in line with the updated SNB CPI forecast for the quarter (0.1%). What stood out at the December meeting was that the SNB downwardly revised their conditional forecast notably over the short term, but left it materially unchanged over the medium term, with a 0.8% figure remaining at the end of the horizon.
- What this means is that should CPI remain close to the lower bound of the SNB's 0%-2% price stability range, the Bank remain convinced inflation is set to pick up by 2027. Put differently, even a temporary downward surprise below neutral would not immediately put a cut into negative rates territory back on the table.
- As usual, should there be a downward surprise, focus should be on domestic and services inflation, where the SNB appeared to look on when judging for medium-term inflationary pressures - which appear central to their rate decisions.
- Nomura sees 0.1% Y/Y, commenting "restaurant and hotel inflation was lower than our forecast for November, so we expect a larger m-o-m rise in December to offset this. We forecast core CPI inflation of 0.5% y-o-y, up from 0.4% in November. The SNB forecasts CPI inflation to average 0.1% in Q4, and our forecast for December is in line with this".
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FOREX: CADCHF at 3-Month Highs Ahead of BOC/SNB [2/2]
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