Swiss government expects 2026 CPI at 0.5% (previous forecast was 0.6%)

Swiss government expects 2026 CPI at 0.5% (previous forecast was 0.6%)

Switzerland may become the first advanced economy to reintroduce negative interest rates, as deflation resurfaces and economic outlook remains subdued. In May 2025, Switzerland experienced its first deflationary print since March 2021, with consumer prices falling by 0.1% year-over-year [1].

The Swiss National Bank (SNB) currently holds its policy rate at 0.25%, and economists expect a rate cut of 25 basis points at the June 19 meeting. Goldman Sachs projects a base case scenario where the SNB will lower its rate to -0.25% by September, potentially reaching -0.75% with more aggressive easing [1].

The Swiss government has revised its 2026 Consumer Price Index (CPI) forecast to 0.5%, down from the previous 0.6% projection [2]. The decline in key commodity prices, such as petrol, natural gas, and base metals, contributed to the negative Producer Price Index (PPI) reading of -0.7% year-over-year [2].

The SNB faces a challenging task, balancing the need to support inflation against the risks of overreliance on unconventional monetary policy measures. While Switzerland's economic fundamentals remain relatively strong, the renewed threat of deflation could push the central bank to breach interest-rate lower bounds again.

References:
[1] https://www.euronews.com/business/2025/06/11/swiss-deflation-fuels-talks-of-negative-interest-rates-is-snb-ready
[2] https://www.xtb.com/int/market-analysis/news-and-research/breaking-swiss-producer-prices-decline-eurchf-ticks-up