 Swiss Franc weakened across the board today after inflation data revealed a reversal in annual CPI back 0.6% in December. This marks the fourth consecutive month of deflationary pressure, as monthly CPI continues to slide. With inflation well below 1% for the past four months, concerns over a return to deflation have grown, intensifying expectations for further monetary easing by SNB in 2025. Following the release, the probability of a 25-basis-point cut by SNB in March rose to 98.4% from 91% previously. Speculation is also building around the possibility of a 50-basis-point cut, similar to December’s move, which would bring the policy rate to 0.00%. Even more notably, discussions are emerging about the return of negative interest rates this year, as a tool for managing deflationary pressures. Euro, on the other hand, is supported by another month of acceleration in headline CPI, while consumer inflation expectations also jumped. Its still early to argue that inflation expectations have deviated too much from ECB's 2% target, and thus, policy easing should still carry on. Yet, the pace would remain measured and gradual, as many policymakers have expressed their preference for.... |
