Data released by Switzerland Federal Statistical Office on Monday showed that inflation in Switzerland rose less-than-expected in October. Swiss consumer price inflation in October rose a seasonally adjusted 0.1 percent, compared to 0.1 percent in the previous month, missing expectations for a rise to 0.2 percent.
On an annualised basis inflation fell -0.2 percent y/y compared to 0.0 percent expected and -0.2 percent in the prior month. HICP inflation rose 0.1 percent m/m from 0.0 percent in the previous month. Annualised HICP fell -0.3 percent same as in the previous month.
Data showed that inflation is struggling to make its way in to the Swiss economy. Switzerland inflation has been running below the Swiss National Bank's (SNB) target range since 2015. As ECB goes ahead with its easy monetary policy stance, appreciation pressure on the franc is likely to be maintained. At the same time the SNB will prevent CHF appreciation with the help of regular interventions.
However, the SNB is unlikely to maintain this strategy long term. At some point the SNB will have to decide whether to continue to prevent the appreciation of the franc so as to maintain its inflation target or whether it considers the continuous rise of the FX reserves.
"We are of the view that in the end the inflation target will draw the short straw, as happened before in January 2015. Once the SNB abandons its strategy EUR-CHF will drop like a stone, said Commerzbank in a report.
