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Investing.com -- The Swiss National Bank (SNB) is likely to lower its policy rate from 0.25% to 0% on Wednesday, according to UBS analysts.
UBS analysts predict the rate cut will occur at the SNB’s upcoming monetary policy assessment on June 19, citing inflation that has undershot the central bank’s forecast and Swiss franc appreciation that has triggered foreign exchange intervention.
In their base case scenario, UBS expects the policy rate to remain at 0% through year-end, though they note downside risks could lead to further action. The reintroduction of a negative policy rate would become more likely if global trade tensions and appreciation pressure on the Swiss franc both increase.
The most significant development since the March rate decision has been the US administration’s introduction of tariffs on most imports. In March, the SNB had warned that "increasing trade barriers could lead to weaker global economic development." With this risk now materializing, UBS believes the SNB will likely revise its growth outlook downward, at least in its commentary.
The drop in the Swiss manufacturing PMI in April and May adds to concerns, according to UBS. However, the SNB may opt to leave its official growth forecast unchanged for now, given the stronger-than-expected GDP growth in the first quarter—driven in part by a surge in exports to the US ahead of the new tariffs.
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