UBS Outlook Switzerland
UBS Outlook Switzerland: Switzerland at Parity
This year forecasting is even more difficult than usual concerning the outlook for the global economy and financial markets. The many blocks comprising the global economy are clearly diverging at present. The US economy on the one hand is solidly on track for growth and the Federal Reserve Bank is prudently tapping the monetary brakes. But the European, Japanese and Chinese central banks remain committed to further expansion to boost periodically flagging economic momentum.
These conditions put the Swiss National Bank under increasing pressure in attempting to maintain a minimum exchange rate policy, although the abruptness with which this policy was abandoned took many entirely by surprise – ourselves included.
UBS economists lowered their growth forecast for the Swiss economy this year from 1.8% to 0.5% after the EURCHF exchange rate floor was abandoned. UBS expects the Swiss franc to fall slightly against the euro in the next 12 months and fluctuate around the 1.05 mark. As long as the franc remains significantly overvalued, however, the Swiss National Bank will keep interest rates negative.
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