By Don Nico Forbes
Swiss consumer price inflation slowed unexpectedly in November, as the country's central bank considers cutting its key interest rate below zero at a meeting next week.
Consumer prices were unchanged compared with the same month a year earlier, against a 0.1% rise in October, Switzerland's statistics agency said Wednesday. A consensus of economists polled by The Wall Street Journal expected consumer prices to rise by 0.1%.
Food and nondurable goods prices slipped, while services prices rose alongside housing and energy costs.
Easing inflation marks the second surprise in successive months for policymakers at the Swiss National Bank, following a slowdown in October. Cooling inflation increases the risk that prices could start to fall, triggering self-reinforcing deflation that could slow economic growth.
November's fall to zero raises significant concerns for SNB policymakers, who had expected a rebound and an average inflation rate of 0.4% for the fourth quarter, said Adrian Prettejohn, Europe economist at Capital Economics.
"This makes it more likely that the SNB will cut into negative rates, though we expect the bank to leave rates on hold...and wait until either March or, most likely, June to cut," he said.
The SNB has previously expressed reluctance to push the key rate into negative territory, where it was for nearly eight years until 2022.
The central bank kept rates at zero at its latest meeting in September, and has an inflation target of between 0% and 2%.
Cooling prices contrast with Switzerland's neighbors in the eurozone. Inflation across the bloc inched up to 2.2% in November, from 2.1% the previous month, according to data published by the European Union's statistics agency Tuesday.
Switzerland's economy contracted in the third quarter of the year as ramped-up U.S. tariffs kicked in. However, a subsequent agreement to lower tariffs has reduced the risk that the economy will enter a lengthy recession that could lead to falling prices, easing pressure on the SNB to cut borrowing costs.
The country originally faced a 39% tariff on many goods exported to the U.S., with pharmaceuticals--a major national export--threatened with a 100% levy. The two countries agreed to lower tariffs to 15% in early November.
A strong Swiss franc could yet provide impetus for the SNB to cut rates. The currency has risen around 13% in the year to date. Still, the central bank has recently appeared less focused on the value of the franc, blunting its potential impact on policy, analysts at Rabobank said in a note.
Most analysts expect the SNB to hold steady at its next meeting on Dec. 11.
Write to Don Nico Forbes at don.forbes@wsj.com
(END) Dow Jones Newswires
12-03-25 0500ET
