Swiss price fall eases in Sept, a year after franc capped

* CPI down 0.4 pct year/year, up 0.3 pct month/month

* Deflationary trend easing a year after SNB capped franc

* Franc weakens in recent weeks to around 1.21 per euro

ZURICH, Oct 8 (Reuters) - The fall in Swiss consumer priceseased slightly in September, a year after the central bankimposed a cap on the soaring franc to ward off deflation and arecession.

Swiss consumer prices fell 0.4 percent from a year ago,compared to a drop of 0.5 percent in August, and were 0.3percent higher compared with the previous month. Both figureswere in line with average analyst forecasts .

"The trend of the last two to three months of deflationweakening has continued. What is responsible for this is thatthe base effect from last year is disappearing," said Sarasineconomist Alessandro Bee.

"For the end of the year we expect inflation around zero sothat is no reason for the SNB to change course."

The SNB set the cap on the franc at 1.20 per euro on Sept. 62011 after investors seeking a safe-haven from the euro zonecrisis pushed the currency from one record to another.

Core inflation, which strips out volatile price elementssuch as fuel, came in at minus 1 percent in September, down from1.1 percent in August.

The franc spent months testing the 1.20 mark, forcing theSNB to intervene heavily to defend the limit, yet an easing ofthe euro zone crisis in recent weeks has seen it weaken againstthe single currency to trade around 1.21.

The amount of cash commercial banks hold with the SNB -called sight deposits and considered an early indicator of theSNB's interventions - fell for the third week running last weekto 291 billion francs, data on Monday also showed.

The Swiss economy, which had proven surprisingly resistantto the crisis in the euro zone, contracted in the second quarterand the central bank expects growth to slow to 1 percent thisyear, given slack momentum globally.

A string of data has painted a downbeat picture, withmanufacturing contracting for a fifth month running in August,consumer sentiment weakening further in the third quarter, andthe ZEW investor sentiment index down in September.

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