(Bloomberg) --
UBS Group AG sees the Swiss National Bank keeping interest rates on hold, reversing its call for a cut to -1%, which would've been a record-low for a central bank.
The bank adjusted its forecast in light of signs of that downside risks to the global economic outlook are diminishing. That makes interest rate cuts in the U.S. and the euro area that could've put pressure on the Swiss franc less likely, it said.
“Our base case is now for a stable SNB benchmark rate until at least 2021,” economist Alessandro Bee wrote in a note to clients. “If however there's a strong appreciation of the franc, the SNB won't wait for its regular meeting in June to lower rates but will announce an ad-hoc reduction.”
The SNB's experiment with negative rates, designed to stem appreciation pressure on the franc, is now in its sixth year. Switzerland's deposit rate of -0.75% is, along with Denmark, the world's lowest.
UBS isn't alone in its belief that downside risks are diminishing. European Central Bank President Christine Lagarde cited a stabilization of growth dynamics at her press conference this week.
To contact the reporter on this story: Catherine Bosley in Zurich at cbosley1@bloomberg.net
To contact the editors responsible for this story: Fergal O'Brien at fobrien@bloomberg.net, Jan Dahinten
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