Is Switzerland about to experience deflation?

Switzerland may be at risk of entering deflationary territory in 2025 due to the strengthening of the Swiss franc, which is challenging policymakers’ control over price growth.

The Swiss National Bank has lowered interest rates three times this year as of September, attributing the country’s declining inflation rate to the robustness of the safe-haven currency, as well as to falling oil and electricity prices.

Analysts increasingly believe that the Swiss National Bank may need to engage in foreign currency intervention to avert a deflationary scenario.

Furthermore, the central bank has adjusted its forecasts downward, setting the average annual inflation rate for 2024 at 1.2%, down from 1.3%, and anticipating a price growth of 0.6% in 2025, a decrease from the previously forecasted 1.1%.