Swiss Franc: inflation undershoots SNB outlook – Nomura

Nomura strategists note that Swiss Consumer Price Index (CPI) slowed to 0.4% year-on-year in July, helped by weaker car fuel prices and easing imported energy costs. They expect Swiss inflation in Q3 to average 0.5% year-on-year, below the Swiss National Bank’s (SNB) 0.7% forecast, implying a softer backdrop for the Swiss Franc (CHF).

Q3 inflation seen below SNB path

"Swiss CPI inflation slowed to 0.4% y-o-y in July (Nomura: 0.5%, consensus: 0.4%) from 0.5% y-o-y in June. Core inflation remained at 0.3% y-o-y (Nomura: 0.4%, consensus: 0.3%)."

"The CPI fell 0.1% m-o-m, below our expectation of no change. The main downside surprise to our forecast was transport, as prices declined 0.4% m-o-m vs. our expectation of a 0.6% rise."

"Domestic prices increased 0.5% y-o-y, while imported product prices were unchanged from a year earlier as imported energy cost pressures have eased after adding to inflation in recent months due to the Iran war."

"The SNB’s latest forecast is for inflation to average 0.7% y-o-y across Q3. Today’s data were below that, and while we expect inflation to accelerate through the quarter, we now forecast inflation to average 0.5% y-o-y for Q3, 0.2pp below the SNB’s forecast."

"Car fuel prices contributed to the slowdown in Swiss inflation in July. We expect inflation in Q3 to print below the SNB’s forecast."