SNB Research: keep calm and carry on

Please find attached my latest SNB outlook report. To summarize:

• Ever since the United States implemented tariffs on Switzerland, the Alpine nation has been in a tough spot. Inflation, weighed down by the strength of the franc, has slowed, barely remaining positive. While underlying domestic inflation looks stronger, this is misleading as it is driven mostly by housing rents. Economic growth is subdued and below potential.
• Despite the problems facing the Swiss economy, the SNB has been clear it wants to avoid taking rates deeper into negative territory. With the policy rate already at zero, it has accepted the fragile status quo as a preferable option.
• Whether the status quo, and the SNB, will hold is up to foreign developments: from trade policy to global economic shocks. That makes forecasting very tricky, so we have developed three scenarios: what developments could force a cut, what could allow a hike, and what could keep rates steady.
• Our base case: the SNB stays put. Not just at their next meeting on December 11th, but for the next twelve months. Switzerland will ride the ups and downs of the global economy, but inflation is unlikely to stray far enough from target to force action.