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EUROPEAN INFLATION: Swiss Oct CPI Preview: Inflation Set For Soft Q4 Start

EUROPEAN INFLATION
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Swiss headline inflation (released 0730 GMT/0830 CET Friday) is expected to have remained steady on a Y/Y basis in October following a 0.3pp drop in September. Consensus looks for +0.8% Y/Y and 0.0% M/M (+0.8% Y/Y, -0.3% M/M Sep). Core CPI is expected to also have kept a steady pace - consensus stands at +1.0% Y/Y (+1.0% Sep).

  • A print in line with consensus would start off Q4 well below the SNB's current projection of 1.0% for the quarter, and should keep in place sizeable expectations for an accelerated SNB cutting cycle. Current market pricing for the December meeting stands at 36bps of expected easing - or around a 44% chance of an outsized 50bp cut.
  • Note that this comes against the backdrop of SNB President Schlegel describing further policy rate easing as "likely", and the SNB also stressing downside risks to the current inflation forecast. Also considering CHF has seen comparatively little volatility since the September meeting, the MNI Markets Team's base case remains for a 25bp cut in December for now.
  • Looking at the underlying drivers of the inflation print, we acknowledge that consensus looks for both headline and core to remain flat - amid Eurozone energy and food/alcohol/tobacco prices seeing notable broad-based upticks in their yearly rates in October. We therefore see some risks of the non-core categories also accelerating in Switzerland this month.
  • Rental prices will meanwhile not see their quarterly update in the October report - so the overall services category will show the development of current inflationary pressures without being skewed by rental inflation.
  • Exacerbated by the fact that CHF has remained in tight ranges since the last SNB meeting, and has largely shrugged off domestic developments more generally, we would expect the October inflation round to have a subdued impact on CHF levels, especially ahead of the US employment report.
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Swiss headline inflation (released 0730 GMT/0830 CET Friday) is expected to have remained steady on a Y/Y basis in October following a 0.3pp drop in September. Consensus looks for +0.8% Y/Y and 0.0% M/M (+0.8% Y/Y, -0.3% M/M Sep). Core CPI is expected to also have kept a steady pace - consensus stands at +1.0% Y/Y (+1.0% Sep).

  • A print in line with consensus would start off Q4 well below the SNB's current projection of 1.0% for the quarter, and should keep in place sizeable expectations for an accelerated SNB cutting cycle. Current market pricing for the December meeting stands at 36bps of expected easing - or around a 44% chance of an outsized 50bp cut.
  • Note that this comes against the backdrop of SNB President Schlegel describing further policy rate easing as "likely", and the SNB also stressing downside risks to the current inflation forecast. Also considering CHF has seen comparatively little volatility since the September meeting, the MNI Markets Team's base case remains for a 25bp cut in December for now.
  • Looking at the underlying drivers of the inflation print, we acknowledge that consensus looks for both headline and core to remain flat - amid Eurozone energy and food/alcohol/tobacco prices seeing notable broad-based upticks in their yearly rates in October. We therefore see some risks of the non-core categories also accelerating in Switzerland this month.
  • Rental prices will meanwhile not see their quarterly update in the October report - so the overall services category will show the development of current inflationary pressures without being skewed by rental inflation.
  • Exacerbated by the fact that CHF has remained in tight ranges since the last SNB meeting, and has largely shrugged off domestic developments more generally, we would expect the October inflation round to have a subdued impact on CHF levels, especially ahead of the US employment report.