In March, the Swiss headline inflation rate is expected to rise slightly to -0.7% yoy, driven by higher oil prices over the past two months. This should to some extent halt the deflationary trend resulting from the strong currency, although a further decline in the headline rate is expected and with risks on the downside.
While the SNB only expect inflation to be back in positive territory towards the end of 2016, a slightly more optimistic view is taken with prices coming closer to zero already early next year.
"While the appreciation since the dropping of the currency floor is significant (some 10% in real effective terms), the outlook in the euro area, and Germany in particular, is also much better than in the past. This should protect the economy from a bigger impact and we thus expect growth to remain around 1.5% this year, while inflation could rise back faster to positive territory once the oil price impact fades", Says Societe Generale
A further significant appreciation of the currency, possible due to safe-haven flows, would however most likely signal the need for further easing measure by the SNB.
