Switzerland September CPI +1.0% vs +1.0% y/y expected

<ul><li>Switzerland September CPI 0.0% vs 0.0% m/m expected</li><li>Prior +0.4%</li><li>Switzerland September CPI +1.0% vs +1.0% y/y expected</li><li>Prior +0.8%</li><li>Switzerland September core CPI +0.5% y/y</li><li>Prior +0.4%</li></ul><p class="text-align-justify" style="text-align: justify;">The breakdownThe readings for September fall within expectations, with headline annual inflation increasing to 1.0% while the monthly figure comes in flat.</p><p class="text-align-justify" style="text-align: justify;">Once again, energy was the main culprit with prices for heating oil, petrol and diesel seen rising further in September. That is somewhat offset by a decline in prices for international package holidays, car rentals, hotels and accommodation.</p><p class="text-align-justify" style="text-align: justify;">Core annual inflation, which is the more important metric, is seen nudging higher to 0.5%. The SNB continues to place more emphasis on this estimate as it excludes the more volatile energy component. But with the reading still being closer to 0% than it is to 2%, the SNB need not panic and rush into making any sudden policy changes for now.</p><p class="text-align-justify" style="text-align: justify;">What does the data measure?The CPI tracks changes in the prices Swiss households pay for a basket of goods and services and is the main gauge of consumer inflation.</p><p class="text-align-justify" style="text-align: justify;">Why does it matter to markets?Inflation is central to the SNB’s rate outlook, particularly with the policy rate already at 0%. A sustained move higher could reduce the scope for easier policy, while renewed weakness would revive concerns about very low inflation.</p><p class="text-align-justify" style="text-align: justify;">How does this fit the broader economic picture?Swiss inflation has been picking up as of late, rising to 0.8% in August largely because of higher energy prices. The SNB expects inflation to increase somewhat further in Q4 before easing during 2027, while remaining firmly within its 0-2% price stability range.</p><p class="text-align-justify" style="text-align: justify;">What is the potential market impact?A stronger-than-expected reading could support the Swiss franc and put some upward pressure on Swiss yields by reducing expectations for further SNB easing. A softer print would likely work in the opposite direction, but the overall impact should be very limited unless the surprise materially changes the rates outlook - which is unlikely.</p><p class="text-align-justify" style="text-align: justify;">Current relevance to markets?Moderate. The release is relevant with the SNB policy rate sitting at 0%, but the bar for a major repricing on the policy outlook is relatively high. That especially after the SNB said last week that medium-term inflation pressure had increased only slightly and its policy stance remained appropriate.</p><p class="text-align-justify" style="text-align: justify;"></p> This article was written by Justin Low at investinglive.com.