Swiss annual inflation eases to lowest rate in nearly four years

ZURICH, Feb 13 (Reuters) - Swiss annual inflation slowed to 0.4% in January, its lowest rate since April 2021 and in line with expectations, official data showed on Thursday, creating more scope for interest rate cuts by the Swiss National Bank.

In December, Swiss annual inflation stood at 0.6%. Compared with the previous month, prices fell in January by 0.1%, the data from the Federal Statistics Office showed, also in line with consensus forecast of a Reuters poll.

The SNB, which targets an inflation rate of between 0 and 2%, has already said it could move its benchmark lending rate into negative territory if necessary.

It slashed the rate by 50 basis points to 0.5% at its December meeting, and markets expect it to lower borrowing costs further when it makes its next decision in March.

Thomas Gitzel, chief economist at VP Bank Group, said the issue was not whether the SNB will cut its key interest rate to zero, but whether it will do it as soon as next month.

"The really big question is what monetary policy will look like once the zero mark is reached," he said in a note, noting that the SNB could pursue negative interest rates and also had the option of intervening in the foreign exchange market.

"However, once interest rates reach zero, the SNB could also pause for a longer period and observe inflationary developments. The latter is probably the most likely scenario." (Writing by Dave Graham, editing by John Revill)