Switzerland's February Consumer Price Index (CPI) data has just been released, showing a slight increase of +0.1% year-over-year, which is a surprising contrast to the expected -0.1%. This headline figure remains unchanged from the previous month, but it's the core CPI that's causing concern. The core annual inflation rate has dipped to 0.4%, a significant drop from the previous month's +0.5%. This trend is alarming as it threatens to push the Swiss economy back towards deflation, a scenario that has been averted for now.
The Swiss National Bank (SNB) is facing a challenging situation. While the conflict between the US and Iran might temporarily boost price pressures, it also comes with a downside. The Swiss franc is strengthening, and the SNB is already intervening in the market to manage this (as seen in the link: https://investinglive.com/forex/swiss-franc-tumbles-after-snb-warning-earlier-20260302/). This intervention is necessary to prevent the franc from becoming too strong, which could harm the economy.
As a result, the EUR/CHF pair is under pressure, falling by 0.2% to 0.9058. The market is closely watching the 0.9000 level, anticipating the SNB's response to this situation. Will they intervene more aggressively in the coming days or weeks to stabilize the currency and the economy?
