UBS SNB Call Change - Expects June Hold

UBS now expects the SNB to hold its policy rate at its June 20 meeting, driven by rate differential considerations.

• They previously thought that ECB and Fed cuts by June would lead the SNB to also cut further, to prevent too much CHF strength. As rate cuts overseas are now expected later, that has "become less convincing".
• They still think that the SNB will "eventually lower its policy rate to 1.00%", which would be consistent with a neutral policy stance in 2025 amid 1% expected inflation.
• They note modest CHF appreciation risk in the short term as additional strength should be limited given the Franc already appreciated recently, even if their call of a hold materializes.
• Markets are uncertain about the outcome of the SNB policy rate decision next week, and currently price in 11.5bps of easing for the meeting. UBS also acknowledges high uncertainty.