EUROPEAN INFLATION: Swiss August CPI Lower Than Expected, Imports Driven

Swiss CPI inflation printed lower than consensus at 1.1% Y/Y in August (vs 1.2% cons; 1.3% prior), and 0.0% M/M (vs +0.1 cons; -0.2% prior). Core CPI came in as expected, at 1.1% Y/Y (vs 1.1% cons and prior) and 0.1% M/M.

• This brings in the Q3 running average Y/Y headline rate at +1.2%, below SNB Q3 expectations of +1.5% Y/Y.
• Housing rental inflation, which has seen its quarterly update this month, increased from +3.4% Y/Y (July) to +4.0%. Excluding housing rentals, which the SNB appears to view as a lagged function of its policy rate, CPI was only +0.4% Y/Y in August - significantly lower than July's rate of +0.8% Y/Y.
• The drop in the headline figure appears to be driven by imported inflation on first glance. The category fell to -1.9% Y/Y, from -1.0% in July.
• As the SNB appeared to focus rather on domestic non-housing services in their assessment of overall Swiss inflationary pressures in the recent past, the signal of the print for SNB monetary policy might be less in magnitude than the headline rate suggests.