UBS CEO says tariff impact on inflation, US Fed still unclear

UBS Group AG Chief Executive Officer Sergio Ermotti said the impact of global tariffs on the US economy and inflation remains unclear, making it harder to predict the outlook for Federal Reserve policy.

“In the US, we still believe that growth will be there, but the inflation question and how it plays out into the central bank’s policies remains open,” Ermotti said in a Bloomberg Television interview in Hong Kong on Thursday.

While a reduction in interest rates by the Fed at its Sept. 16-17 meeting is baked into expectations, beyond that, investors are shifting predictions on the pace of policy adjustments.

“The true issue on tariffs will be seen on consumers,” Ermotti, 65, said. “In the US, we need to see exactly if there is an inflationary aspect of tariffs. I think it’s unclear.”

Goldman Sachs Group Inc. CEO David Solomon signalled this week that there’s no need for the Fed to rapidly cut rates, diverging from the Trump administration’s pressure on the central bank to loosen monetary policy.

Ermotti said the global economy is being divided into two — one that is driven by technology and artificial intelligence and the other that is more traditional. The divergence is playing out in areas like Hong Kong’s “booming” market for initial public offerings, he said.

“In general there is a constructive momentum,” he said. “But the jury’s out because the complexity is not only the economics, but also the very complex geopolitical environment.”

The Swiss economy ministry is seeking input from UBS as it scrambles to get an improved US trade deal, Bloomberg reported last month. The Trump administration has imposed 39% levies on Switzerland’s exports to the US, the highest tariff rate for any developed nation, posing a major threat to businesses and the economy.

A potential role in helping the government navigate the tariffs could help boost UBS’s standing with Swiss authorities after relations tensed over proposed capital rules that the bank opposes.

Ermotti described the capital plans as “excessive” and called the debate on banking regulation in Switzerland a “huge distraction.”

Switzerland unveiled proposals to toughen its bank capital rules following the 2023 collapse of Credit Suisse, which was merged into UBS to create a lender that would likely be too big to rescue. The move could add as much as $26 billion to UBS’s existing capital demands, according to government estimates.

“The requirements as they are, are very punitive and excessive, and therefore we would need to think about how to protect our shareholders and our stakeholders’ interests,” Ermotti said.

The debate has raised questions over whether the country’s largest lender might limit its growth or even move its headquarters. Ermotti reiterated that the bank has no plans to shrink its business and wants to keep operating out of Switzerland.

“It’s difficult for me to see a successful global organisation that is very close to clients, that is very resilient and strong in terms of capital, embracing a strategy of shrinking as a good way to succeed in the future,” he said. “So we are very focused on keeping our global footprint.”

UBS is focused on completing its integration with Credit Suisse by migrating clients in Switzerland, an exercise that will finish next year, Ermotti said.

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