According to the Finance and Economics APP, Swiss inflation rate in September fell to the lowest level in over three years, indicating that the country's central bank is expected to further relax its monetary policy. Data released by the Swiss Federal Statistical Office on Thursday showed that Swiss consumer price index (CPI) rose by 0.8% year-on-year in September, lower than the general expectation of economists of 1%, and also lower than the previous value of 1.1%.

The data shows that costs of holidays and air travel decreased, as well as prices of rbob gasoline, heating oil, and diesel, offsetting the impact of rising prices of outfits and footwear. In addition, the year-on-year growth rate of core CPI (excluding fresh and seasonal products as well as energy) in September also declined to 1%.

The Swiss National Bank implemented its third interest rate cut of the year last week, reducing the policy rate by 25 basis points to 1.0% to counter the easing inflation pressure in Switzerland. Despite market speculation that the Swiss National Bank would cut rates by 0.5 percentage points following the Federal Reserve, they did not accelerate the rate cut. Former central bank chairman Thomas Jordan stated: "Over the next few quarters, the Swiss National Bank may need to further lower the policy rate to ensure price stability in the medium term."

The newly appointed Swiss National Bank President Martin Schlegel, who took office this Tuesday, stated that further interest rate cuts appear "quite likely." He emphasized in his speech that the growth pressure on Swiss prices is currently driven entirely by the service sector, while commodity costs are decreasing. He added that about half of the remaining inflation is due to rents.

Bloomberg economist Maeva Cousin said: "Swiss inflation rate in September fell below the midpoint of the Swiss National Bank's target range of 0%-2%, with further downside risks in the future due to the decrease in electrical utilities costs and pressure caused by the strength of the Swiss Franc on imported commodity prices."

Swiss franc EFG Asset Management Senior Analyst GianLuigi Mandruzzato said: "The unexpected sharp drop in inflation in September highlights the question of whether the Swiss National Bank will cut interest rates by 25 or 50 basis points in December." "The likelihood that the Swiss National Bank's policy interest rate will reach a low of 0.5% in the first half of 2025 is clearly increasing."

Other market participants pointed out that the strong Swiss franc is suppressing inflation in Switzerland. Frederik Ducrozet, Head of Macroeconomic Research at Pictet Wealth Management, said: "The Swiss National Bank may have no choice but to continue cutting interest rates unless the Swiss franc reverses its trend, which currently seems unlikely."

Switzerland's lower borrowing costs are expected to lead to a reduction in the key reference rate for rents, which may start to decrease housing costs around mid-2025. Meanwhile, wage increases remain below the upper limit of the Swiss National Bank's 0%-2% inflation target range.

However, the price pressures faced by Swiss households are not reflected in the official inflation indicators. It is reported that Swiss household medical insurance premiums will increase by 6% next year, which is not included in the official inflation indicators. The index only includes doctor bills and other actual costs.

The Swiss National Bank took the lead in implementing this round of interest rate cuts in March, but the current challenge is that consumer price growth is falling further below the lower limit of the target range, approaching zero. This will put the Swiss National Bank very close to deflation, with Thomas Jordan and his colleagues facing deflationary pressures for most of their tenure.

Swiss central bank officials have lowered their forecasts for consumer price growth, now forecasting an average of 1.2% for this year, 0.6% for 2025, and 0.7% for 2026. More and more economists are warning that the likelihood of inflation rates falling below the Swiss National Bank's target range is increasing. Arthur Jurus, strategist at investment bank Oddo BHF Switzerland, said: "Deflation is a real risk in Switzerland."