Switzerland's inflation rate for September fell to its lowest level in over three years, signaling potential further easing of the country's monetary policy by the Swiss National Bank. According to the Swiss Federal Statistical Office, the Consumer Price Index (CPI) increased by 0.8% compared to the same period last year, falling short of analysts' median forecast of 1% and considerably lower than August's 1.1% rise.
The decline in costs for holidays and air travel, as well as reductions in gasoline, heating oil, and diesel prices, offset the increase in clothing and footwear prices. Core CPI, which excludes fresh and seasonal products and energy, also decreased, currently sitting at 1%.
Like its neighboring Eurozone countries, Switzerland is in a phase of interest rate cuts and combating deflation. The Swiss National Bank recently reduced borrowing costs for the third time, and the newly appointed Chairman, Martin Schlegel, has indicated that further interest rate cuts are "very likely." Schlegel highlighted that the current rise in Swiss consumer prices is entirely driven by the service sector, while the cost of goods is declining.
Additional downward pressure is expected from electricity costs, which will decrease by approximately 12% in January. In Switzerland, consumer electricity rates can only be adjusted once a year and are regulated by a government agency. Lower borrowing costs are also anticipated to reduce the key reference rate for rents, potentially lowering housing costs from around mid-2025. Meanwhile, wage increases remain stable, keeping below the upper limit of the central bank's 0-2% inflation target.
