Fintech News App noticed that data released by the Swiss government on Friday showed that the inflation rate in Switzerland dropped to the lowest level in more than three years in October, indicating that Swiss banks will further cut interest rates this year and in 2025. Data from the Swiss Federal Statistics Office shows that Switzerland's CPI rose by 0.6% year-on-year in October, lower than the forecasted 0.8%.

The price increase is at the lowest level since July 2021, reflecting a decline in food, outfits, and household goods prices. The Swiss government stated that prices fell by 0.1% on a month-on-month basis.

After the data was released, the Swiss franc fell to a five-week low, with the market expecting Swiss banks to reduce borrowing costs to prevent inflation from falling below the 0-2% target range.

The market currently believes that there is a 72% chance that the Swiss banks will cut interest rates from 1% to 0.75% at the next meeting on December 12, and a 68% chance of lowering them further to 0.5% in March next year.

"The situation of declining inflation is worrying for the Swiss banks, and they are certainly expected to cut interest rates by 25 basis points in December, but I wouldn't be surprised if they cut by 50 basis points," said J.Safra Sarasin economist Karsten Junius.

"But I believe that the Swiss banks are more inclined to leave some room and cut interest rates by another 25 basis points in March, then by 25 basis points in June, eventually reaching 25 basis points," Junius added. He expects the Swiss banks to also increase their intervention in the foreign exchange market in early 2025.

EFG Bank economist GianLuigi Mandruzzato stated that the inflation rate in October is far below the latest forecast of 1% for the fourth quarter by Swiss banks.

He said, "These data have also increased the Swiss National Bank's consideration of the possibility of a larger interest rate cut of 0.5%, rather than the standard 0.25% cut implemented since March, as the risk of negative inflation in 2025 has significantly increased (even if only temporarily)."