Swiss inflation is coming in below expectations, which may be a reason for the SNB to change its rhetoric next week. Consumer prices fell 0.2% in November, slowing the annual pace to 1.4% from 1.7%, while no change was expected. This is a two-year low and below the historical 101-year average (1.75%), although above the 0.6% average since 2000 when the SNB switched to inflation targeting.
The strong franc is one of the reasons why inflation is falling faster than in the US and the eurozone. At the beginning of December, the USDCHF was near the historical support line of 0.87 that has been in place for the past twelve years. The EURCHF is also near historical lows, apart from a brief collapse in January 2015. Other crosses with the franc (JPY, CAD) have also been near historical extremes in recent days.
The slowdown in inflation triggered an impulsive sell-off in the franc, which lost around 0.5%, but recovered most of the losses later in the day. Markets are in no hurry to shrug off the news, preferring to wait until December 14, when the central bank will present its critical interest rate decision and quarterly policy projections. However, today’s data is the last piece of the puzzle, as the only data to be released before the rate decision is the unemployment rate, which rose from 1.9% to 2.1% in six months.
