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SNB Pauses Easing Amid Tariff Shock

• SNB holds at 0% as expected, pausing after six cuts. Inflation at 0.2% provides a stability buffer despite US tariff economic headwinds.
• Growth outlook deteriorates with 2026 forecast cut to "under 1%" as machinery and watches are hit hardest by 39% US tariffs impacting exports.
• A high bar to negative rates is maintained, despite CHF strength and unemployment rising. Service sector resilience limits immediate easing pressures.

Resilience Is Reinstating

• Falling US jobless claims and bullish GDP revisions are reinstating evidence of ongoing resilience. Underlying GDP only slowed by about 0.1pp in H1, or 15% of 2024’s average.
• Risk management rate cuts to balance the higher costs of being wrong on the downside raise the probability that easing proves premature and swiftly ends.
• The ECB already sees the transmission of its past cuts trending loan growth higher. It may reach pressures consistent with hikes next year, and it already clashes with easing.

By Philip Rush