Switzerland likely to experience deflationary pressure

At a quarter past nine the moment of truth will be reached once again for the SNB. At that time the Swiss Federal Statistical Office will publish inflation data for September. And at 0.0% (mom) and -1.5% (yoy) the data is likely to constitute another stab in the SNB's large deflation wound. In July and August the SNB used the oil price as the explanation for the bad results. Of course the SNB can continue to use that explanation yet again, as it expects inflation to bottom in Q4 2015. 

However, if deflation does not ease soon after that and if the underlying inflation trend does not soon turn positive that too will have been used up very soon and the market will be justified in asking what the SNB can still do to prevent the deflation tendency to become entrenched. Looking the other way will not be an option and further rate cuts just will not work either as the stockpiling of cash would other-wise rise notably, says Commerzbank. 

That would leave FX interventions in EUR-CHF. Interventions are likely to become necessary if the ECB was to increase or extend its asset purchasing program thus weakening the euro. That gives rise to the question whether the SNB would be able to or would want to keep interventions up for an extended period of time, added Commerzbank.