"The risk of less favorable global economic developments has decreased somewhat compared to the last quarter. Nevertheless, structural problems in Europe persist, which could cause new tensions on the markets."
- Thomas Jordan, the Swiss National Bank President
Further evidence a cap on the Swiss Franc is still vital, occurred on Tuesday, as a report from the Swiss Federal Statistical Office showed that consumer prices fell both on a monthly and annual basis, putting more pressure on the Swiss National Bank to prevent deflation and risks of economic slowdown in the Alpine country. Consumer Price Index, which accounts a majority of overall inflation in the country, fell 0.1% on a seasonally adjusted base in October, confounding estimates for a 0.1% increase. On a yearly basis, the decline was even steeper, with CPI falling 0.3% last month, down from a 0.1% drop in September, and below analysts' expectations for a 0.2% decline. Market reaction was immediate, as the Franc fell against the single currency and U.S. Dollar, reaching 1.2315 and 0.9132, respectively.
While some analysts believe that amid recent string of upbeat data, and signs of economic amelioration in the global economy, SNB's cap may become increasingly unnecessary as domestic currency could start to lose ground versus the single currency. Nevertheless, the latest data is bolstering the case the recovery is still fragile and despite improvement in economic sentiment, domestic demand remains subdued.
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