Swiss inflation declined again in December, according to data released on Tuesday, strengthening expectations for additional interest rate cuts by the Swiss National Bank (SNB) this year, which markets now consider almost guaranteed.

The Federal Statistics Office reported that Swiss prices increased by 0.6% year-on-year in December, a slight decrease from 0.7% in November.

The figure matched the consensus forecast in a Reuters poll of analysts and marked the fourth consecutive month of annual inflation staying below 1%.

In response to the data, market expectations for a 25-basis point rate cut by the SNB in March, reducing the current 0.5% rate, increased to 98.4%, up from 91% previously.

“Another interest rate cut by the SNB in March is now virtually certain,” stated GianLuigi Mandruzzato, an EFG Bank economist.

“The question is just how much - will the SNB go for 50 basis point cut like they did in December or stick with 25 basis points to fend off the risk of too low inflation for too long.”

Furthermore, Adrian Prettejohn of Capital Economics also anticipates another rate cut by the Swiss National Bank in March, citing growing disinflationary pressures, and suggested that additional cuts could be possible, Reuters reports.

In addition, Bloomberg Economics senior economist, Maeva Cousin commented: “The decline in core and headline inflation in the last month of 2024 — despite upward pressures from energy — confirms the weakness in Switzerland’s underlying price gains. There’s more to come going into 2025, when we expect energy contributions to turn sharply negative — we see the headline reading dropping to 0.2% in January.”

On a month-to-month basis, Swiss prices declined by 0.1%, in line with expectations, as vegetables and international holidays became marginally more affordable.

Consequently, Swiss inflation for 2024 averaged 1.1%, comfortably within the Swiss National Bank's target range of 0% to 2%.

While December's reading alone is unlikely to alter the central bank’s calculations, another weak inflation figure suggests that the SNB may implement further rate cuts in 2025, following four cuts in 2024, according to Gero Jung, chief economist at Mirabaud, a Swiss bank.

“The SNB is concerned about strong disinflationary risks, bringing the overall inflation rate close to zero, but also the weakness of the eurozone economy, which will affect Switzerland,” said Jung, who forecasts the SNB will cut rates by 25 basis points in both March and June, bringing its policy rate to 0%.