Insights 
VT 
Switzerland’s Consumer Price Index (CPI) for August increased by 0.2% year-on-year, aligning with expectations. The previous month also saw a 0.2% increase.
The core CPI rose by 0.7% year-on-year, slightly below July’s 0.8%. This minor change in core inflation is not impacting the Swiss National Bank’s current outlook.
Low Price Pressures in Switzerland
Today’s inflation data confirms the trend of low price pressures in Switzerland. The annual core inflation figure, which we watch closely, dipped to +0.7%, reinforcing the view that there is no immediate inflation threat. This non-event solidifies the current outlook for the Swiss National Bank (SNB).
The SNB has already cut its policy rate twice this year, bringing it down to 0.75% in the June 2025 meeting. With this inflation reading, market pricing continues to show around a 60% probability of another 25 basis point cut at the next meeting on September 18th. The data gives us little reason to bet against the central bank’s established easing path.
For derivatives, this predictability means implied volatility on the Swiss franc should remain suppressed. Three-month implied volatility on EURCHF is already hovering near yearly lows of 5.5%, and this report supports strategies that involve selling options to collect premium. We see this as an opportunity to sell strangles, as a major breakout from the current range seems unlikely.
Interest Rate Differential
The interest rate differential between Switzerland and other major economies, like the United States where rates remain above 4%, continues to weigh on the franc. We should therefore maintain positions that benefit from a weaker franc, such as buying call options on USDCHF or EURCHF. Looking back, the gradual policy divergence from the SNB in early 2024 was the start of this sustained franc weakness.
This environment is reminiscent of the years following the 2015 de-pegging, where a consistently dovish SNB led to long periods of declining franc volatility. Just as then, the central bank’s clear and steady path makes sharp, unexpected currency moves less probable. This historical context gives us more confidence in maintaining short volatility and directional short-franc positions.
