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EUROPEAN INFLATION: Inline SZ CPI Would Keep Q3 Below SNB Projection (1/2)

EUROPEAN INFLATION

Swiss headline inflation (released 0730 BST / 0830 CET) is expected to have decelerated on a Y/Y basis in August after remaining steady in July. Consensus looks for +1.2% Y/Y and +0.1% M/M (+1.3% and -0.2% respective priors). Core CPI is expected to have kept a steady pace - consensus stands at +1.1% Y/Y (+1.1% prior).

  • A print in line with consensus would consolidate the running average of Q3 inflation significantly below the SNB's projection of 1.5% Y/Y for this quarter, and might solidify market pricing factoring in a not insignificant probability of a 50bps cut at the September 26th meeting - pricing currently stands at ~32bps of easing expected.
  • Rental prices, one of the main upside drivers of Swiss inflation in recent quarters, will see their quarterly update this month, with analysts being divided over its impact on the headline rate this time.
  • Having said that, note that the SNB has implicitly flagged in the past that they see the rental price indicator as a lagged function of the policy rate (Jordan speech April 26), so attention should also remain on other domestic services inflation sectors, such as tourism, which Jordan mentioned previously.
  • The range of estimates submitted on Bloomberg is quite large in August: out of the total 16 submissions for headline Y/Y, 2 are looking for 1.0% and 1.1%, respectively, 6 are looking for 1.2%, 5 for 1.3%, and 1 for 1.4%.

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