For once, the Swiss National Bank (SNB) did not spring any surprises yesterday, leaving its key interest rate unchanged, Commerzbank's FX analyst Michael Pfister notes.

SNB expects weaker Swiss growth due to US tariffs

"However, the press conference once again highlighted the SNB's dilemma: while SNB President Martin Schlegel emphasised the bank's willingness to cut interest rates further if necessary, he also underscored the higher bar for a repeat of negative interest rates. Officials would probably have delivered an interest rate cut yesterday if the rate had still been above 0%. However, the SNB has already used up most of its scope for further cuts."

"We continue to assume that the SNB has now reached the end of its interest rate cutting cycle. For negative interest rates to be reinstated, either a major global crisis affecting Switzerland through weaker growth and/or a stronger Swiss franc would need to occur, or inflation would need to decline into deflationary territory."

"Neither of these scenarios is likely at present. Although the SNB expects weaker Swiss growth due to US tariffs, the impact is likely to be limited. We also expect inflation to stabilise at the lower end of the target range. Overall, the SNB's decision yesterday confirmed our previous assessment."