Switzerland’s Consumer Price Index (CPI) for July increased by 0.2% compared to last year, which is higher than the expected 0.1%. This information, released by the Federal Statistics Office on August 4, 2025, indicates changes in inflation trends in the country. The Core CPI, which excludes unstable items like food and energy, went up to 0.8% year-on-year from a previous 0.6%. This change indicates a shift in core inflation trends, showing adjustments in Switzerland’s economic situation as the year continues.

Inflation And The Swiss National Bank

This new inflation data from Switzerland suggests that deflationary pressures may not be as strong as previously thought. With core inflation now at 0.8% year-on-year, we need to reassess our expectations for the Swiss National Bank (SNB). This unexpected increase makes it more likely that the SNB will pause its rate cuts. Previously, the SNB was a leader in easing policy, having lowered rates in both March and June of 2024. However, this new data complicates matters ahead of their upcoming meeting on September 18, 2025. The market was leaning towards another rate cut, but now those chances are becoming less likely. For traders, this will have a direct impact on Swiss Average Rate Overnight (SARON) futures. We can expect a sell-off in contracts for the fourth quarter of 2025 as the odds of another rate cut this year decrease. This adjustment reflects the market’s shift towards a more cautious SNB.

Implications For The Swiss Franc

In the foreign exchange market, a less accommodating SNB is positive news for the Swiss franc (CHF). It’s wise to reconsider any significant short positions against the franc, especially against the euro and the dollar. Implied volatility on CHF options will likely rise as traders prepare for potential currency strength leading up to the September meeting. The EURCHF exchange rate, which reached a one-year high near 0.99 just last month, may now face significant resistance. The unexpected inflation figure gives the SNB the opportunity to back away from the currency weakening it previously supported. This makes purchasing call options on the CHF a more appealing hedge or speculative move. While 0.8% core inflation is still low compared to the 3.4% peak seen in 2022, the change’s direction is what influences markets in the short term. Over the coming weeks, it will be crucial to monitor how interest rate swaps price in the chance of a final rate cut in 2025. This new data suggests that betting on that outcome is becoming riskier. Create your live VT Markets account and start trading now.

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