Switzerland is expected to see Gross Domestic Product at a standstill in the third quarter to bring the annual rate of economic growth to just 1.7%, the lowest in over 5 years. Last month, the Swiss National Bank unexpectedly slashed interest rates by a full percentage point citing “higher risk of a marked slowdown in economic activity” from appreciably worsening international conditions. While the markets continue to price in no changes in benchmark borrowing costs, traders may see the Swiss National Bank continue to surprise with monetary easing should the acute economic downturn send inflation too far below the target level. Indeed, the bank acknowledged that the selloff in commodities (and oil in particular) will mean that “price stability will be restored sooner than expected, and inflation is likely to fall below 2% as early as the end of this year.”
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