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UBS analysts project that the Swiss National Bank (SNB) will lower its policy rate by 25 basis points to 0.25% in March. This adjustment is expected to be the final rate cut in the current series of monetary policy changes, according to UBS’s SNB preview.
UBS indicated that while there is a possibility of the policy rate falling to 0% or dipping into negative territory, such scenarios are not the primary expectation.
The analysts noted that even with a policy rate of 0.25%, certain banks’ reserves would incur negative interest rates under the existing tiered remuneration framework.
The potential implications of this rate cut could lead to a reconsideration of the discount factor applied between the SNB’s upper and lower remuneration rates. UBS suggested that if the SNB were to further reduce the policy rate to 0%, it would likely be accompanied by more significant modifications to the tiering system.
Additionally, there could be changes to the availability of SNB bills and the trading of SARON, which is the Swiss Average Rate Overnight.
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