In March, the Swiss headline inflation rate is expected to rise slightly to -0.7% yoy, driven by higher oil prices over the past two months. This should to some extent halt the deflationary trend resulting from the strong currency, although a further decline in the headline rate is expected and with risks on the downside.While the SNB only expect inflation to be back in positive territory towards the end of 2016, a slightly more optimistic view is taken with prices coming closer to zero already early next year. “While the appreciation since the dropping of the currency floor is significant (some 10% in real effective terms), the outlook in the euro area, and Germany in particular, is also much better than in the past. This should protect the economy from a bigger impact and we thus expect growth to remain around 1.5% this year, while inflation could rise back faster to positive territory once the oil price impact fades”, Says Societe GeneraleA further significant appreciation of the currency, possible due to safe-haven flows, would however most likely signal the need for further easing measure by the SNB.
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