Synopsis:

Goldman Sachs expects the Swiss National Bank (SNB) to deliver a 25bp rate cut next week, bringing the policy rate to 0%. Despite strong Q1 GDP, weak inflation and rising trade uncertainty justify easing. A larger 50bp move is unlikely, as the SNB remains cautious and data-dependent.

Key Points:

Expected 25bp Rate Cut:

• Goldman forecasts the SNB will lower its policy rate by 25bp to 0% at the June meeting.

• This would be a response to inflation falling below the SNB’s price stability range.

Subdued Inflation:

• Headline inflation was -0.1% y/y in May, undershooting SNB’s Q2 forecast.

• Goldman expects inflation to remain soft, supporting the case for easing.

Growth Outlook Softening:

• Q1 GDP was strong, but forward indicators have weakened due to rising global trade tensions.

• Slack in the economy has modestly increased, reducing the inflationary threat.

Cautious Forward Guidance:

• The SNB has stressed that policy decisions are not based on a single data point.

• A 50bp cut is possible but unlikely unless further trade or inflation shocks materialize.

Conclusion:

Goldman expects a 25bp rate cut from the SNB next week, reflecting soft inflation and rising external risks. However, the SNB is likely to remain measured, awaiting clearer signs of persistent weakness before considering a return to negative rates.