UBS economists are adjusting their inflation expectations for Switzerland downwards. After inflation unexpectedly fell in November, the bank now expects the Swiss National Bank (SNB) to cut interest rates for the first time in early summer.
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The forecast for average annual inflation in 2024 will be reduced to 1.6% from the previous 2.0%, according to an assessment by the major bank’s Chief Investment Office on Wednesday.
The bank is confident that inflationary pressure has eased in various components of the consumer price index, such as food, household goods, transport and restaurants and hotels. In addition, below-average growth is expected in Switzerland in the near future, which should further cushion inflationary pressure, as will the strong Swiss franc and falling inflation in the Eurozone.
According to UBS, the fact that inflation does not fall more significantly than forecast is due to the expected price increases for public transport and the increase in the reference interest rate for rents, which will make housing even more expensive in the future. Energy prices are also expected to rise further in January.
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Swiss consumer inflation slows more than expected
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Swiss inflation unexpectedly slowed to a two-year low, adding to the case for Swiss National Bank officials to keep borrowing costs steady when they meet next week.
Because of the declining inflation risks, the Swiss National Bank (SNB) is unlikely to raise interest rates again at next week’s meeting, according to UBS estimates, but rather leave them unchanged. A first interest rate cut at UBS is now expected in June, followed by two further cuts in September and December 2024. The bank had previously assumed that the first reduction would not occur until next September.
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