“There is some scope for further interest rate cuts but, given the scope for franc appreciation to push Switzerland into deflation territory, it would make sense for the SNB to directly target the currency’s valuation through FX interventions,” Adrian Prettejohn, Europe economist at Capital Economics, told CNBC by email on Monday.
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Capital Economics said in a note last week that it now sees inflation in Switzerland falling to 0.3% in 2025, down from its previous estimate of 0.8%, due to the strength of the franc and lower oil and housing costs. That figure could turn negative in certain months, Prettejohn noted Monday.
“Our forecast is for inflation to fall as low as 0.1% in some months, so it would not take much to push that below zero,” he said, describing deflation as a “real possibility.”
