10:19 AM EST, 12/04/2024 (MT Newswires) -- UBS sai it expects the Swiss central bank (SNB) to further ease

monetary policy at the Dec. 12 meeting.

Since the last rate cut in September, the SNB has repeatedly indicated that "further cuts in the SNB policy rate may become necessary in the coming quarters to ensure price stability over the medium term".

Inflation in Switzerland is likely to fall below the SNB's expectations of 1.0% for Q4 2024, wrote the bank in a note to clients. In October, inflation reached 0.6% year over year, marking its lowest

level since June 2021, and it only slightly increased to 0.7%

in November.

As a consequence, a rate cut in December seems highly probable. UBS anticipates the SNB will lower next week its policy rate to 0.75% from the current 1.00%.

Looking ahead to 2025, the bank foresees at least another 25bps

rate cut in March, with a stable policy rate of 0.50% for the

remainder of the year. However, the risk of a lower policy rate throughout 2025 has increased.

UBS forecasts inflation to fall to 0.5% or below in Q1, driven by a

10% average reduction in electricity prices, which should lower the inflation rate by up to 0.2 percentage point. Such low inflation will likely fuel expectations of further monetary easing by the SNB.

Additionally, potential United States tariffs and sluggish eurozone

growth could hinder Swiss economic acceleration in 2025, pointed out the bank. If growth remains below potential amid low inflation, a more expansionary monetary policy may be warranted.

In such a scenario, a policy rate closer to what financial markets

are currently anticipating would become more likely, it added.

In the view of UBS, a negative policy rate is still a low-probability

scenario that would only be considered in an environment

of persistent appreciation pressures on the Swiss franc,

close to zero or negative inflation prints, and a recessionary

environment in Europe, according to UBS.

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