Switzerland: macro update

Switzerland’s GDP adjusted for sport events grew by 0.5% q-o-q in Q2, above trend, but this good performance was essentially driven by the pharmaceutical and chemical sectors. Leading indicators paint a mixed picture for Q3.

Swiss CPI inflation eased from 1.3% y-o-y in July to 1.1% y-o-y in August. Once again, the main driver was imported inflation going deeper into negative territory while domestic inflation remained stable.

Given the recent economic data, the SNB will likely sound dovish at its meeting on 26 September. We continue to expect the SNB to cut its policy rate by 25bp to 1.0% and to remain open to intervening in the FX market if necessary.

The risk that the SNB’s policy rate is cut below what the SNB considers the neutral level (i.e. 1.0%) later this year or in 2025 has increased.