UBS Economics-European Economic Comment _SNB No signs of FX intervention ...-117519645

ab29 August 2025Global ResearchEuropean Economic CommentSNB: No signs of FX intervention in JulyRenewed focus on the SNB's FX intervention instrument The SNB in its June meeting lowered the policy rate to 0% and in our view set a relatively high hurdle for negative rates. Yet inflation remains low (0.2% y/y in July, UBSe for August: 0.1%) and the CHF remains not far from historic highs (Figure 6Nominal and real CHF movements). The focus has thus shifted to the SNB's second policy instrument, FX interventions. Amid safe-haven flows and sharp CHF appreciation around "Liberation Day", we estimate the SNB conducted the largest FX purchases since 2021 in April to limit the extent of appreciation and the downward pressure on Swiss inflation, but the purchases did likely not continue in May and June when the exchange rate stabilized. Today's release of July balance sheet data allows us to update our FX intervention estimates for the month of July, when CHF largely traded rangebound. Our trackers do not show intervention activity in July. That said, our estimates are based on monthly data, and there might have been purchases and subsequent sales within the month. At any rate, we maintain the view that (i) the SNB has not restarted the large scale and more persistent FX purchases that we saw from 2015 to 2021 but is currently using the FX intervention instrument in a discretionary way; and that (ii) the bar for renewed discretionary FX purchases in case of sudden CHF appreciation is low, as the April episode exemplifies. July estimates from balance sheet data: no FX purchasesUpdating our FX intervention trackers with the SNB's July balance sheet data indicate no FX purchases. Both our estimate using adjusted sight deposits and the one using adjusted FX reserves are practically zero for July (Figure 1Monthly FX intervention estimates, CHFbn). This compares to average monthly estimates of CHF 0.15bn from early 2024 to March 2025, to CHF 5bn in April 2025 and to CHF 3-5 bn (on average, with peaks of up to CHF 30 bn) between 2015 and 2022. The correlation of our monthly estimates with official SNB intervention data is relatively high (Figure 2Quarterly FX intervention estimates vs actual, CHFbn), but we will look for confirmation in the official Q3 2025 intervention data, which will be released at the end of December. The next balance sheet data (August) will be released on 29 August, together with the official intervention data for Q2. SNB outlook: US tariffs alone not sufficient for negative ratesWhen the SNB cut the policy rate by 25bp to 0% in the June meeting, one of the key messages in our view was that the hurdle for a further rate cut into negative territory is relatively high. Since then, inflation has surprised to the upside twice, CHF has remained broadly stable in trade-weighted terms and the US has introduced a 39% tariff on Swiss exports. The latter complicates the outlook for the SNB as weaker growth due to tariffs might dampen underlying in