UBS: What to Expect From the ECB, BoE, SNB, and Riksbank
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The Middle East conflict presents new challenges for major European central banks, particularly through rising inflation and slowing growth. UBS expects the ECB to deliver 25-basis-point rate hikes in June and September, bringing the deposit rate to 2.5%, though risks skew toward earlier, faster, or larger moves—including a possible April 30 hike, consecutive June-July increases, or even 50-basis-point steps.
The Bank of England is expected to hold for an extended period, with the next policy moves being cuts in November 2026 and February 2027. Given that the economic and labor market starting points are weaker than during the 2022 energy shock, further BoE hikes represent a risk scenario rather than the base case.
The Swiss National Bank is forecast to maintain a 0% rate through mid-2027, as franc strength offsets energy-driven inflation. However, if ECB tightening widens rate differentials, the SNB could hike as early as June 2027. The March meeting indicated greater concern over franc strength and increased willingness to intervene in FX markets.
The Riksbank is expected to hold at 1.75% this year, as Swedish inflation continues to fall amid tax cuts and subdued underlying price pressures. Markets price 75 basis points of hikes by end-2026, but UBS views this as requiring substantial krona depreciation. ECB rate strategy favors long 10-year Bunds and short 10-year BTP-Bund spreads, while the EUR/USD second-quarter target is lowered to 1.16.