Author: IntaCapital Swiss

Brushstrokes and Balance Sheets: How AI Is Repainting Art and Banking 

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From the Renaissance studio to the modern trading floor, two seemingly distant worlds—art and banking—have always been connected by one invisible thread: the search for value. Whether it’s a painter layering pigments to capture light or a banker layering risk models to capture returns, both are engaged in acts of creation, interpretation, and persuasion. 

Now, artificial intelligence (AI) has arrived like a disruptive patron, commissioning both artists and bankers to work in new ways. The same algorithms that can conjure a Rembrandt-style portrait from a text prompt can also forecast market movements or detect financial fraud. And the parallels go far deeper than the surface. 

The Canvas and the Ledger: Shared Foundations 

An artist approaches a blank canvas much as a banker approaches an empty ledger: with a vision. 

  • In art, the blank space is filled with form, colour, and emotion. 
  • In banking, the empty page becomes a structured composition of numbers, risk assessments, and projected returns. 

Both require a deep understanding of patterns. Where the painter sees symmetry, contrast, and movement, the banker sees cashflows, volatility curves, and correlations. AI’s great leap is its ability to read these patterns at a scale and speed that neither the artist’s eye nor the banker’s intuition could match. 

Pigments and Portfolios: Building Value from Components 

In the studio, a painting is built layer by layer—each pigment, glaze, and stroke contributing to the final image. In banking, portfolios are assembled asset by asset—each bond, share, or commodity adding to the whole. 

AI is transforming both processes: 

  • In art, generative models mix visual “pigments” from vast training datasets, producing new images in seconds. 
  • In banking, AI blends financial “pigments” from global data streams, assembling portfolios that respond dynamically to changing conditions. 

In both cases, the craft lies not in laying down every layer by hand, but in directing the composition—knowing which elements to combine and in what proportion. 

The Curator and the Risk Manager: Gatekeepers of Quality 

Art galleries rely on curators to select, frame, and present works in a way that resonates. Banks rely on risk managers to select, structure, and present investment opportunities that align with a client’s goals. 

AI can assist both roles: 

The AI curator can scan millions of artworks to find emerging styles or undervalued pieces. 

  • The AI risk manager can analyse decades of market data to spot anomalies and opportunities before they’re visible to humans. 

But in both worlds, the danger is the same: without a human curator or risk manager applying judgment, AI may promote works (or investments) that look promising in the data but lack lasting value. 

Forgery and Fraud: The Dark Arts of Both Worlds 

In art, forgery undermines trust in the market. In banking, fraud does the same. Both rely on deception—passing off something false as genuine. 

AI is a double-edged sword here: 

  • It can create near-perfect forgeries of artistic styles, challenging the notion of authenticity. 
  • It can also produce synthetic financial documents or deepfake identities to bypass security. 

Yet the same technology can also protect both industries. AI can detect subtle inconsistencies in brushwork that reveal an art forgery, just as it can detect unusual transaction patterns that signal financial fraud. 

Auctions and IPOs: Moments of Market Truth 

An art auction is a public performance of value discovery. Bidders raise paddles in response to the perceived worth of a work. An initial public offering (IPO) plays out similarly—investors subscribe to shares at a price determined by demand and expectation. 

AI’s role in both is growing: 

  • In the auction world, algorithms predict hammer prices based on past sales, artist trajectory, and collector sentiment. 
  • In the IPO world, AI models assess market appetite, optimal pricing, and timing. 

In both cases, AI becomes the backstage analyst, advising on how to position an asset—whether that asset is a painting or a stock. 

Commissions and Structured Products: Tailored Creations 

Wealthy patrons once commissioned paintings to match their tastes and ambitions. Today’s high-net-worth individuals commission financial products—structured notes, bespoke funds, or AMCs—designed to fit their risk appetite. 

AI accelerates customisation in both: 

  • In art, an AI model can adapt its style instantly to a patron’s preference—more chiaroscuro here, a hint of Cubism there. 
  • In banking, AI can assemble a product mix tailored to the client’s income goals, tax situation, and ethical preferences. 

The patron’s role is the same: to articulate intent clearly enough for the creator—human or AI—to deliver the desired outcome. 

Restoration and Portfolio Rebalancing: Preserving Value Over Time 

Art restoration keeps old masterpieces vibrant, repairing damage while respecting the original vision. In finance, portfolio rebalancing preserves the health of an investment over time, correcting drift while respecting the original strategy. 

AI is bringing precision to both: 

  • In restoration, AI can analyse old pigments to match colours exactly or reconstruct missing details based on historical records. 
  • In finance, AI can detect micro-shifts in asset performance and rebalance automatically to maintain alignment with objectives. 

Both aim to maintain integrity—ensuring that what was once valuable remains so in the present.  

Emotional Impact vs. Financial Impact 

 While art seeks to move the heart and finance seeks to move the bottom line, both ultimately trade in trust and perception. A painting’s value is what someone believes it’s worth; a bond’s price is what the market believes it will return. AI changes how both perceptions are formed. 

  • In art, algorithms can simulate the emotional weight of colour, light, and composition, influencing what audiences respond to. 
  • In finance, algorithms simulate the likely outcomes of investments, influencing where capital flows. 

The parallel is clear: AI’s predictions become part of the reality they describe, shaping demand in both markets. 

The Artist and the Banker: Directors, Not Replacements 

One fear looms large: will AI replace the artist and the banker? The more fitting analogy is that AI moves them both from craftspeople to directors. 

  • The AI-assisted artist might spend less time perfecting brushwork and more time conceptualising themes and narratives. 
  • The AI-assisted banker might spend less time crunching numbers and more time interpreting insights and advising clients. 

In both cases, the human becomes the storyteller—the one who frames the work, whether that work is a painting that hangs in a gallery or a portfolio that lives in a private bank’s vault. 

A Shared AI Renaissance 

The Renaissance was not just a rebirth of art; it was also a financial revolution, with the rise of merchant banks funding the projects that defined the era. Today’s AI revolution could be another shared chapter.

Imagine: 

  • AI curates an investment portfolio composed partly of tokenised artworks, valuing them with the same predictive analytics it uses for equities. 
  • Art collectors use AI to generate, authenticate, and value works that are instantly tradable as financial instruments. 

The boundaries blur. A masterpiece can be both an aesthetic object and a yield-generating asset. A bond can be both a source of income and a cultural statement, linked to projects that create beauty as well as profit. 

Conclusion: Guarding the Frame 

Whether you’re painting on canvas or painting numbers onto a balance sheet, the challenge in the AI era is the same: to use the machine’s capabilities without letting it define the work entirely. 

Frames matter—in art, they focus the eye; in banking, they define the rules. AI can fill the frame with astonishing skill, but it takes human vision to decide what belongs inside it. 

The artist and the banker have more in common than they might think. Both are in the business of shaping perception, guiding value, and leaving a mark that endures. AI is simply the newest brush in their toolkit, capable of making every stroke sharper, faster, and more intricate—provided they still hold the brush. 

Will Switzerland Join the United Kingdom’s Dirty Money Task Force?

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At the end of August 2023, Switzerland announced that they would be proposing new rules that would toughen anti-money laundering laws in response to claims by the United States who said that their sanction enforcements were weak. Indeed, the United States went further by saying that Switzerland had not done enough to crack down on the movement of dirty money.

To this end, Switzerland produced a proposal which included a “Federal Register” in which companies, corporations and other legal entities would find it harder for criminals and similar associates to hide assets from investigating authorities, and would have to disclose the names of any beneficial owners. However, much to the annoyance of the United States, the register would not be made public.

Previous to 2023, Switzerland had slowly been moving away from original traditions where bank secrecy was protected which at the time had made it the banking centre for the world’s rich. However, much criticism still emanated from the United States and a number of other countries as it was felt not enough had been done plus the enforcement of sanctions on Russia after the invasion of Ukraine seemed patchy at best.

Furthermore, at that time, Switzerland was also unwilling to join a multilateral task force designed to improve cooperation on seizing sanctioned Russian assets. However, as of Tuesday 19th August, it was announced that Switzerland is considering joining a British-led international task force, the IACC (International Anti-Corruption Coordination Centre), which targets “Kleptocrats*” in order to recover stolen assets.

*Kleptocrats/Kleptocracy – translated means “Rule by Thieves” and it is where corrupt government leaders systematically utilise their political power for criminal gain whereby they steal wealth and resources from their nation. This crime takes place on a massive scale which involves huge corruption that depletes a nation’s budget, hinders public services and economic development, and ultimately undermines democratic governance. Kleptocrats often hide their mass of stolen wealth in other countries which requires a transnational network of financial and legal enablers to obscure ownership and launder money, a problem that host countries together with the international community are continuing to struggle to combat.

Indeed, experts in this arena advise that sources close to officials confirm that Switzerland currently has observer status with IACC and during a visit earlier this month by the British Foreign Secretary David Lammy he discussed the possibility of the country participating further with the IACC and the possibility of becoming a full member. As a result, Switzerland is considering a number of options for future cooperation with the IACC but definite decisions have yet to be reached.

Joining the task force would enable Switzerland to share intelligence and work more closely with countries on investigations that target dirty money. The British Foreign Secretary has advised that Switzerland has been a key partner in the fight against corruption and illicit finance and further participation with the IACC would be invaluable. Since the illegal invasion of Ukraine by Russia on 24th February 2022, Britain has increased its efforts against illicit finance and has become the global leader against kleptocracy.

A Brief Overview – The Global Outlook for the Remainder of 2025

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The central banks’ banker BIS (Bank for International Settlements) recently said that fractious geopolitics and trade tensions have exposed deep fault lines in the global financial system and the then head of the BIS, Augustin Carstens, (retired 30th June 2025) said the U.S.-driven trade war and other policy shifts were fraying the long-established economic order. He went on to say the global economy is at a pivotal moment entering a new era of heightened uncertainty, which was testing public trust in institutions, as well as central banks.

Today, experts suggest that for the remainder of 2025 there will be a slowdown in economic growth characterised by falling inflation, however analysts point to sticky inflation in the United States, along with persistent risks emanating from geopolitical tensions, together with increasing trade tensions which could perhaps result in a more negative impact on the global economy. Indeed, some analysts who were expecting a soft landing for the global economy have retracted these opinions as said soft landing has suddenly disappeared from view, as long-established trade relationships began to crumble with the announcement back in April this year of higher-than-expected U.S. trade tariffs.

Some financial news outlets have suggested that emerging and long-standing structural challenges are being faced by the global economy, and, for over 20 years, productivity growth has been on a downward path in many of today’s advanced economies. Furthermore, with the introduction of Trump’s tariffs this could accentuate the decline as further pressure is placed upon supply chains who are also facing current geopolitical tensions (the ongoing invasion of Ukraine by Russia, Middle East tensions between Israel, Iran and Gaza, and the potential invasion of Taiwan by China) that could be the driver of more frequent supply shocks.

On the global inflation front, analysts suggest that inflation is set to decline, though at a divergent pace, with some economies enjoying further declines, whilst others, especially the United States, face possible increases due to tariffs. However, some forecasters are at odds with each other with the IMF (International Monetary Fund) predicting a steady global decline from 2024 to 2025, and one major Wall Street player suggesting a global core inflation increase for the remainder of 2025.

Some financial commentators have even pointed the finger at the President of the United States as a danger to the global economy, not only for the remainder of 2025 but potentially for the rest of his term in office. Indeed, his continued attacks on the Chairman of the Federal Reserve, Jerome Powell, and his attacks on the Federal Reserve itself for not reducing interest rates could threaten global financial stability. Some experts have pointed out the incumbent President was not elected due to his extensive knowledge of interest rates and all the attendant data that aids central banks in their decisions to hold, drop, or increase rates. The fear is that if politicians and in this case a U.S. president takes effective control of the Federal Reserve for their own political aims, this could set a dangerous precedent for other central banks where monetary policy is subject on a global basis to political interference.

There are a number of negative factors that could affect the global economy by the end of this year. Experts suggest that apart from geopolitical tensions, regional conflicts and trade wars, there is the negative impact of high public and private debt possibly exacerbated by higher interest rates, together with persistent/sticky inflation in some advanced economies along with stagnant productivity and an ageing population which can all have a negative effect on sustainable economic growth. Interestingly, as of today, India has been hit by a doubling of tariffs (for buying Russian oil) from 25% to 50%. There is no agreement in sight therefore India could serve as a template by the end of the year and into 2026 as to what impact tariffs have on their economy.

How Tariffs are being Weaponised by President Trump

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For years, international trade was as tranquil as it comes and within the offices of the WTO (World Trade Organisation) on the banks of Lake Geneva worked the trade lawyers and trade economists unencumbered by the problems of today. Sadly, the twin forces of geo-economic fragmentation and geo-political confrontation have undermined the balance of the global trade regime and what we witness today is the weaponisation of tariffs*. The most pronounced effect of tariffs in the present day has come from the White House with President Trump’s “Liberation Day” on 2nd April this year, where he announced punitive tariffs across the board on all of the United States’ trading partners.

*Tariffs – are defined as a tax on imported goods levied by governments typically as a percentage of the product’s value. It is designed to protect domestic industries, raise government revenues, or serve as a political tool in trade negotiations. Importers pay the tax which increases the cost of foreign products, potentially making domestic alternatives more attractive to consumers.

The return of Donald Trump to the White House has transformed the utilisation of tariffs into instruments of both economic and political coercion and in the process has reignited economic nationalism. Some experts argue that the weaponising of trade (via tariffs) is where existing trade relations are manipulated to advance political and geo-political objectives, the ultimate goal being to push another government to change its policies in favour of the country wielding the tariffs. The biggest offender in the new tariff war is the United States and as seen below, they have successfully employed tariffs to bend the will of certain governments to their way of thinking.

On the domestic front, (Trump’s efforts are not just confined to foreign governments), he is reshaping domestic supply chains and even threatening iconic power price points. However, there are downsides as the 50% increase in tariffs on imports of aluminium and steel*, (which came into effect on 3rd June 2025) have increased production costs for such brands as Home Depot, Walmart, Target, Lowes Proctor & Gamble and AriZona Iced Tea. Famed for its 99 cents cans AriZona sources most of its aluminium domestically, but tariffs on imported aluminium/steel distort the broader market increasing prices for all producers. The tariff will increase prices which will be passed on to customers, and in the case of AriZona this will undercut a key brand identity that has endured for decades.

*Aluminium and Steel Tariffs – The tariff on these two metals doubled to 50% on June 3rd this year with some counties getting exemptions and paying the original tariff of 25%. The impact of this increase in the US has potentially led to higher consumer prices and fewer jobs in downstream industries, including higher domestic commodity prices and supply chain disruption. Experts say the main reason for these tariffs are national security under section 232 of the Trade Expansion Act 1962 to protect domestic industries from unfair foreign competition and to help correct trade deficits.

Elsewhere on the domestic front on the 6th of this month President Trump announced a plan to impose a 100% tariff on imported semiconductors*, with exemptions for companies that commit to manufacturing in the United States. The White House framed the policy as national security concerns with over-reliance on Asian countries such as Taiwan and South Korea for critical technology. This move was not about trade imbalances, it was about forcing multinational companies to expand manufacturing with the borders of the United States. Interestingly, Apple has been exempt from these tariffs after pledging to invest USD 600 Billion into U.S. based chip production and related infrastructure. This has now set a precedent where tariff relief can be bought through commitments that serve President Trump’s domestic industrial goals.

*Semiconductors – is a material with electrical conductivity that falls between that of a conductor (e.g., copper) and an insulator (e.g., glass). Their unique ability to be controlled make them essential components of modern electronics including computer chips, transistors and diodes.

Under the current administration in the White House, experts conclude that traditional legal frameworks are being bypassed with tariffs which were originally imposed on China, Mexico and Canada by invoking the IEEPA (International Emergency Economic Powers Act) citing security reasons. This is a classic example of weaponising tariffs in order for Donald Trump to bend counties to his will. It did not work with China but initial reactions from Mexico and Canada showed that Trump had certainly won the initial battle but Mexico has had a stay of execution and Canada and the U.S. are currently in negotiations.

Elsewhere in Europe, the member countries have agreed to increase defence spending to 5% of GDP for NATO in line with the wishes of President Trump. However, analysts suggest that the invasion of Ukraine by Russia on 24th February 2022 prompted the European Union members to raise defence spending but interestingly it was not agreed upon for just over three years when President Trump introduced punitive tariffs.

In another example of weaponising tariffs, on 6th August President Trump issued Executive Order “Addressing Threats to the United States by the Government of the Russian Federation imposing additional tariffs, currently 25%, on Indian Imports (circa USD 81.4 Billion 2023). Experts suggest that India has been targeted because of their direct and indirect purchases of Russian oil (averages a 5% discount), and now the Indian tariff is 50% on most goods imported to the U.S. which is seen as a penalty for facilitating Russia’s oil trade. However, the White Hopes the weaponising of tariffs against India will hopefully persuade them to reduce their dependency on Russian oil. Also, in the week ending 25th July 2025, the White House agreed tariff deals with Japan, Indonesia and the Philippines; granting them lower rates than previously threatened in exchange for them to sign up to national security commitments, the verbiage of which was somewhat opaque.

Conclusion

President Trump has shown even his closest allies are not immune from weaponised tariffs and neither are historical neutral trading partners such as Switzerland who were recently hit with a 39% punitive tariff on Swiss goods, mainly pharmaceuticals, watches and luxury

goods. It appears that currently no country is safe from the Trump trade war machine which uses tariffs as a blunt instrument to beat other countries into submission.

In his second term, Donald Trump has elevated tariffs from a traditional economic safeguard to an overt instrument of political leverage. Whilst tariffs have long been used to protect domestic industries the current approach is far more aggressive as they are being imposed and lifted not purely on economic grounds, but as bargaining chips in corporate negotiations and diplomatic manoeuvres.

U.S. Investment Surges into European AI – A Swiss Perspective

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Since pulling back during 2023’s tech downturn, U.S. investors are once again muscling into deal flows in Europe – and AI is the magnet. Data released by PitchBook* shows the U.S. share of deal making in Europe is once again climbing, and the standout category which is pulling American investors back into the market is AI. Experts suggest that from a global perspective, the capital base is there as U.S. private investment in AI in 2024 was circa USD 109 Billion with ample dry powder** to deploy into the European markets when the time is right.

*PitchBook – Is the premier resource for comprehensive, best-in-class data and insights on the global capital markets.

**Dry Powder – This refers to unallocated cash reserves or highly liquid assets held by investment firms, venture capital funds, hedge funds, and private individuals which in this case is ready to be deployed for investment purposes.

A Brief Overview

From a Swiss vantage point there are three forces which are converging and the first is a dense research-to- start-up pipeline anchored by ETH Zurich and EPFL.

ETH Zurich is a public research university and is widely regarded as a leading institution known for its strong focus on science and technology, significant research contributions, and prestigious academic standings.

Based in Lausanne, EPFL is Europe’s most cosmopolitan university and it welcomes students, professors, and collaborators from more than 120 different countries. EPFL has both Swiss and international vocation and focuses/specialises on three different missions being teaching, research, and innovation.

The second force is regulatory clarity via the EU AI Act, with Switzerland chartering a lighter sector-based path.

The third force is Switzerland’s world-class infrastructure and their electricity reliability which makes the country (and its neighbours) a first-class destination to build and run AI.

Why Switzerland Hits the Sweet Spot

Talent and Spin-Out Velocity

ETH Zurich’s AI ecosystem is a massive magnet to investors as in 2024 ETH spinoffs raised CHF 425 Million across 42 rounds, a ten year ten times increase and a powerful sign that even in choppy markets the pipeline to start-ups is in a healthy state. Indeed, the ETH A1 centre’s network of affiliated start-ups spans applied robotics, industrial AI, and model reliability which according to experts is exactly where corporates from the United States are looking to invest their capital.

Regulatory Readability

As opposed to the EU’S (European Union) horizontal* AI Act**, Switzerland’s Federal Council chose a more sector-specific approach, integrating AI duties into existing laws whilst planning to implement the Council of Europe’s AI convention. This they felt would be more beneficial, rather than passing a sweeping one size fits all AI law, which for founders and investors reduces the legislative shock whilst still tracking the usual international norms on safety and rights. It should be noted that the EU AI Act is highly relevant to Swiss companies who are selling into the Eurozone/single market, as for example obligations for general purpose AI (GPAI)*** and the EU is ensuring that timelines do not slip. All in all, the dexterity and agility of the Swiss together with the EU-grade clarity on market entry makes investment decisions by U.S. investors much easier.

*Horizontal in Law – This refers to the ability of legal requirements meant to apply only to public bodies to affect private rights. It arises where a court dealing with a legal dispute between two private entities interprets a legal provision to be consistent with certain legal norms in such a way as to affect the legal rights and obligations of the parties before it.

**EU AI Act – On 12th July 2025 this Act was published in the Official Journal of the European Union and entered into Law and became binding on 1st August 2025. This Act refers to the European Union’s Artificial Intelligence, a comprehensive regulation aimed at governing the development and use of artificial intelligence systems within the EU. It is the first major AI regulation of its kind, and focuses on risk assessment, and categorisation of AI systems to ensure safety and ethical development.

***GPAI – This refers to all General-Purpose AI models as defined within the EU AI Act. These are powerful AI models trained on broad datasets****, capable of performing a wide range of tasks, and potentially integrated into various downstream AI systems. The EU AI Act places significant obligations on providers of these models, especially those with systemic risks.

****Datasets – This is a structured collection of data used to train and test artificial intelligence models. These datasets provide the raw materials for AI algorithms to learn patterns, make predictions, and perform tasks and can, simply put, be viewed as a textbook from which AI models can learn.

Infrastructure Gravity

The Alps supercomputer at the CSCS (Swiss National Supercomputing Centre) is a critical component offering significant processing power for AI applications and is a key part of the AI initiative at positioning Switzerland as a leading hub for trustworthy AI development. Overall, the build-out of AI in Europe is accelerating fast with San Francisco’s Open AI Inc launching their Stargate Norway, the first AI data centre initiative in Europe. Whilst this build does not situate itself in Switzerland, its proximity and any grid stability across the region changes the equation as to where to build AI-heavy companies and experts suggest that Switzerland is primed as a European hub that U.S. investors will back for “near-compute*” opportunities.

*Near-Compute – This refers to the concept of placing processing units (like CPU’s – central processing unit or GPU’s – graphic processing unit) closer to memory or even within the memory itself, rather than relying solely on traditional computing architectures. This approach aims to minimize data movement between memory and processing units which can significantly reduce latency and energy consumption.

Switzerland has enjoyed a number of AI deals such as Meteomatics in St Gallen, a USD 22 Million to scale high-resolution AI-enhanced weather models and drone systems selling into the automotive, aviation, and energy sectors. Another success is Daedalean the Zurich avionics-AI pioneer has just entered into (subject to closing a USD 200 Million acquisition by Destinus a big player in the European aerospace sector, who pioneer autonomous flight systems. Other successes included Zurich’s LatticeFlow, an AI governance and reliability model and ANYbotics which operates in the robotic sector and industrial AI.

Conclusion

Whilst Switzerland’s overall start-up funding cooled in 2024 (down CHF 2.3 Billion which is -15% Y-O-Y), interestingly AI rounds doubled accounting for 22% of all rounds, and is uniquely placed due to infrastructure, power/electricity, the ability to build AI with EU-Act readiness, the ability to stand next to compute, and the ability to use the country’s events and clusters as magnets for U.S and global investment. The macro capital tide is unmistakable with generative AI venture capital setting a new pace in Q1 and Q2 in 2025, and Switzerland sits first and third in Europe and globally respectively for Deep Tech venture capital funding per capita, which, according to experts indicates a strong international interest in the country’s AI ecosystem.

Furthermore, Microsoft has made substantial investments in Switzerland’s AI and cloud infrastructure including a USD 400 Million investment (announced in June of this year) to expand its datacentres near Zurich and Geneva which will meet growing demand for AI services whilst keeping data within the country’s borders. As mentioned before, the companies from the United States are taking bigger and bigger slices of the European AI action, and Switzerland will, according to experts, massively benefit because it pairs deep technical IP and enterprise-friendly regulation with direct access to the Eurozone’s markets.

The Bank of England Cuts Interest Rates

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On Thursday, 9th August the BOE (Bank of England) cut interest rates by 25 basis points to 4% and in the process, the MPC (Monetary Policy Committee) took borrowing costs to its lowest level since March 2023. However, this was no ordinary MPC meeting as for the first time in its 23-year history the vote was deadlocked and the committee took the unprecedented step of voting twice, with the vote finely split by 5–4 in favour of a rate cut. The decision by the MPC saw two senior voting members (Chief Economist Huw Pill and Deputy Governor Clare Lombardelli) vote against Governor Andrew Bailey, with officials being deeply divided over the direction of interest rates, with the United Kingdom not only experiencing a cooling labour market but a resurgence in inflation.

The last time the MPC cut interest rates was in May of this year and since then the opposition to interest cuts has unexpectedly grown, however as seen above the two dissenting votes for a rate cut helped win the day. The BOE is still sticking with its overall guidance informing the financial markets that rate cutting will be “gradual and careful” whilst warning of a cooling in demand for workers and an emerging slack in the economy. The Governor of the BOE Andrew Bailey reiterated previous comments by saying “it remains important that we do not cut bank rate too quickly, or by too much”. The MPC also pointed out that they expect inflation to hit 4% in September – up from the previously advised figure of 3.7%.

Elsewhere tax data suggests that since the Labour Government announced plans to increase employers’ payroll tax and the minimum wage, 185,000 jobs have been lost. Data from the BOE’s own survey of firms show a growing stagflation risk, and in the upcoming year, they expect businesses to put up their own prices by circa 3.7%. Indeed, the MPC further advised that since May of this year upside risks to the consumer price had moved slightly higher with particular emphasis towards rising food bills, and they went on to say that the outlook for employment growth over the next 12 months has deteriorated and the expectations on wage growth remains at 3.6% which is somewhat sticky and has become a bit of a hot potato.

Governor Bailey at a press conference once again insisted that interest rates are on a downward path and that the current inflation figure will only be temporary, but he was somewhat evasive and wary about when they will announce the next interest rate cut. Money market traders have reduced their bets on a November cut to under 50%, especially as Governor Bailey went on to say, “there is, however, genuine uncertainty now about the course of interest rates”. Experts suggest that the BOE is very worried that inflation may well persist as the current headline figure is way above the benchmark target, and there is the possibility that policymakers are considering ending the easing cycle.

Analysts suggest that there are interesting times ahead at the BOE especially as the world waits and sees the effect of President Trump’s tariffs on world trade and the global economy. Furthermore, Thursday’s interest rate cut was the most divisive under the five-year stewardship of Governor Bailey, plus no Deputy Governor has ever voted against Governor Bailey, that is until Claire Lombardelli’s dissenting vote. Such dissent from the Deputy Governor is highly unusual and highlights the deep fractures within the MPC as to how to tackle the resurgence in the current price pressures. The labour party happily points out that under their government borrowing costs have been coming down, but those rates dictated by the financial markets have been going in the opposite direction with the 30-year gilt yield prior to the BOE’s interest rate cut standing at 5.43%. After the BOE’s announcement last Thursday the 30-year gilt yield stood at 5.32%. Some commentators have made a somewhat damning point in that perhaps within the Bank of England there are those who are perhaps politically motivated and not so independent as we are led to believe.

Some experts suggest that the MPC in lowering the borrowing rate is in direct conflict with their prediction of inflation increasing and this despite the fact the United Kingdom has the highest inflation rate within the G7. Furthermore, analysts point out that since April, the pound has dropped 1.5% and 2.5% against the US Dollar and the Euro respectively leaving the pound open to further falls whilst pushing inflation up through higher import prices.

The current disagreements will also impact policymakers and their decisions as to how to tackle the current uplift in inflation and with the Governor and Deputy Governor seemingly split on monetary policy, Governor Bailey’s vote will become more and more important as the United Kingdom approaches the end of the year.

Trump Hits Switzerland with 39% Tariffs

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The highlight of Switzerland’s summer calendar is the national holiday (Switzerland’s birthday), which fell last Friday, 1st of August, but all of Switzerland, including the government, woke up to the headlines that President Donald Trump had hit the country with punitive tariffs of 39%. The tariffs cover all Swiss imports to the United States and in 2024, according to data released by the United Nations COMTRADE data base totalled USD 72.88 Billion, leaving America with a trade deficit of USD 38 Billion, (though other figures suggest it’s as high as USD 47.4 Billion,) the 13th largest of any nation with the USA. This has obviously caught the eye of President Trump who has made it clear that he wishes to eradicate trade imbalances with all of America’s trading partners.

This has come as a huge shock for both the politicians and the business elite as only a few weeks ago the government was exuding confidence regarding its tariff negotiations with the United States. Indeed, back in May, Switzerland hosted the United States and China in the hope of preventing a trade war which gave Switzerland’s President Karin Keller-Suter the opportunity to meet with Scott Bessent, the United States Trade Secretary. It appeared that the meeting was successful having been told that Switzerland was second in the queue after Great Britain to strike a trade deal with the U.S. at potentially a 10% tariff, much lower than the 31% as unveiled by President Trump back in April’s “liberation day”.

Therefore, the 39% has come at a complete shock and politicians are divided as to the negotiation tactics, with some saying the government were too obsequious, and others saying they were too tough, while many just said the negotiation tactics were not up to scratch. However, the trade deficit according to officials is the sticking point, and basically the Swiss sell more to the U.S. than it buys, and the population of just 9 million quite frankly just do not like U.S. goods such as their cheese, chocolates, and cars. However, the Swiss have tried to compensate for the trade deficit by reducing their own tariffs on imported U.S. industrial goods to zero, and many of the Swiss companies have multibillion dollar investments in U.S. plants. Data suggests that Swiss investment in the U.S has created circa 400,000 jobs, furthermore Trump has ignored service industries which would bring the deficit down to USD 22 Billion, but sadly President Trump is just fixated on trade imbalances.

Analysts point to one problem which is where on earth did the 39% come from, which makes it appear that President Trump is just arbitrarily picking out numbers from thin air. There appears to be little wiggle room in negotiations, but Switzerland could import LNG (Liquified Natural Gas) from the U.S. plus they can also point out they are committed to investments in the United States totalling USD 105 Billion. In Q1 two thirds of the trade deficit was due to shipments of gold bullion, this was due to the price of gold not due to any added value by the Swiss refineries. Experts point out that gold is not manufactured in Switzerland but reprocessed into bars and one offer to Trump could be a one off tariff of 50% on gold.

This Thursday, 7th August is deadline day for tariffs and experts point out that the Swiss government will be moving heaven and earth to get an extension. Indeed, officials from the Swiss State Secretariat for Economic affairs have already contacted their counterparts in the United States to try and negotiate a way forward, plus the President of Switzerland herself is flying to Washington (without an invitation) to meet face-to-face with Trump in the hope of avoiding the increase in tariffs. Trump is known for flip flopping at the last minute so the President of Switzerland can only hope they can extend the current deadline and get a reprieve, otherwise the damage to their economy could be quite serious. Experts point out that the key to the current tariff impasse would be that instead of dealing with Trump’s negotiators is instead to win over the man himself.

For Switzerland’s export-driven economy, the impact could be significant. Key industries—including luxury watchmaking, pharmaceuticals, and precision engineering—depend heavily on access to the U.S. market. Higher tariffs risk eroding profit margins, raising prices for American consumers, and prompting Swiss firms to reassess their U.S. expansion plans. Politically, the move is a shock to a nation that prides itself on neutrality and stable bilateral relations. It signals that even close, low-conflict partners are not immune from politically motivated trade actions.

The tariffs also complicate Switzerland’s position within the EU-Swiss economic framework, as Brussels weighs its own responses to Trump’s trade policy. In the short term, Swiss exporters may absorb some costs to maintain market share, but over time, the pressure could accelerate efforts to diversify export destinations and invest in U.S.-based production—ironically, one of Trump’s intended outcomes.

Overview of the New Trade Agreement Between the European Union and the United States

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On Sunday 27th July, and after weeks of tense behind the scenes negotiations, the President of the European Union, Ursula von de Leyen, shook hands with United States President, Donald Trump, concluding a trade pact a week before the upcoming deadline as set by the White House. The trade deal was announced by the two leaders at Donald Trump’s golf course, Turnberry, located in Ayrshire, West Scotland. Those close to the negotiations said the “framework deal” was finally stuck, and ultimately it took a face-to-face meeting between the two leaders to reach an agreement. However, a number of EU member countries have already voiced their disapproval and in some cases outright hostility to the agreement.

The White House administration has lauded the agreement as a big win for Donald Trump, advising that based on last year’s trade figures the US governments will be better off by circa USD 90 Billion. Furthermore, included in the agreement is the EU’s promise to purchase arms and energy products from the United States which analysts estimate to be in the region of hundreds of billions of US Dollars. Elsewhere, carmakers in the EU will only face a 15% surcharge on imports into America, whereas the global tariff introduced in April is 25%. Indeed, the Eurozone agreement to a 15% tariff on most exports (steel will remain at 50%) to the United States has prevented a trade war which would have probably dealt a hammer blow to the global economy.

Not all European leaders were happy with the agreement with initial words coming from Benjamin Haddad, France’s Junior Minister for Foreign Affairs, who called the agreement “unbalanced”, Hanneke Boerma, the Dutch Minister for Foreign Trade, said the deal was “not ideal” and urged further negotiations with the United States, and the French Prime Minister Francois Bayou said it was “tantamount to a submission”. On Wednesday 30th July France’s President, Emmanuel Macron, said the deal is “not the end of it”. He went on to say that “the European Union had not been feared enough in negotiations with the United States towards a trade deal”, pledging to be firm in follow-up talks. Meanwhile, Friedrich Merz, the German Chancellor, said the agreement would “substantially damage the nation’s finances”, France’s far right leader, Marine Le Pen, said the agreement was a “political, economic and moral fiasco”, whilst the Hungarian leader, Viktor Orban, announced that “Trump had eaten von de Leyen for breakfast”.

A number of experts have already said that this is a bad deal for the European Union. In fact, when Great Britain announced a 10% tariff agreement with the United States, the statement that came out of Brussels was “we will never accept such humiliating terms”. Analysts now suggest that the hit to the EU’s economy would be 0.4 percentage points by the end of 2026 and the average tariffs on imports from the Union are set to rise from 1.5% (when Trump was elected) to circa 16%. Meanwhile, experts are suggesting that the EU is now a pushover and will have a weakened hand in future negotiations, and recently the Sino/EU trade negotiations came to nought partly as in part the Chinese would not make any concessions to a European Union that lacks leverage.

However, von der Leyen said the deal avoided the near-term catastrophe of an all-out trade war and had nullified any near-term uncertainty. Sadly, some experts and economists have said there is a perception that the European Union cannot defend their own interests which will undermine their position as a key geopolitical player which is the key to their wish for the Euro to play a bigger global role. Indeed, the president of the European Central Bank, Christine Lagarde, recently advocated a greater international role for the Euro, specifically its active function as an international reserve currency. Experts suggest that since the US/EU trade agreement such words may well fall on deaf ears. The US/EU trade agreement is not a done deal, just look at all the negative comments and outright hostility being shown by some member countries towards this agreement, and it suggests some very choppy seas are just around the corner.

The Federal Reserve Keeps Interest Rates on Hold

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On Wednesday, 30th July and for the fifth straight time, the Federal Reserve’s FOMC (Federal Open Market Committee) kept interest rates steady at 4.25% – 4.50%. The committee voted 9 – 2 to keep interest rates on hold with the two dissenting voices belonging to Governor Christopher Waller and Governor Michelle Bowman. Both governors are appointees of President Donald Trump and experts point out that such dissension from political appointees has not occurred for over 30 years which is a sign of both political pressure and economic uncertainty being felt by the Federal Reserve. Chairman Powell indicated he was not concerned with the dissenting voices but he did say “On the dissents, what you want from everybody and also from a dissenter is a clear explanation of what you are thinking and what arguments you are making”. 

Officials from the Federal Reserve downgraded their view of the economy saying “recent indicators suggest that growth of economic activity moderated in the first half of the year” as opposed to previous statements where growth was characterised as expanding at a solid pace. Interestingly, analysts have pointed out that today’s interest rate decisions were made without key data, and the Chairman of the Federal Reserve Powell has pointed out that decisions are currently data driven. This key data is the Commerce Department’s Personal Income and Outlays report, (due out 31st July), which provides essential data on household spending and income, and the Personal Consumption Expenditures price index which is the Federal Reserves favoured inflation gauge.  

Following the FOMC meeting, Chairman Powell said the central bank has confidence in the economy of the United States and that it is strong enough to hold interest rates steady as it determines how the tariff policy of President Trump ultimately plays out and their effect on the economy. He went on to say “Higher tariffs have begun to show through more clearly to prices of some goods, but their overall effects on economic activity and inflation remain to be seen. A reasonable base case is that the effects on inflation could be short lived, reflecting a one-time shift in the price level. But it is also possible that the inflationary effects could instead be more persistent and that is a risk to be assessed and managed”.  

Despite political pressure and personal insults from President Trump to Chairman Jerome Powell the Federal Reserve held interest rates steady. Despite many experts predicting a rate cut at the next meeting of the FOMC (16th – 17th September), the financial markets pared back bets expectations for a rate cut, whilst interest rate futures indicated a 50/50 chance of a rate cut in September down from 60%. Data released showed that GDP had increased on an annualised basis by 3% in Q2 after Q1 showed a shrinking of 0.5%, experts put the swing down to companies front-loading of imports to avoid tariffs. Consumer spending advanced at its slowest pace over Q1 and Q2 since the pandemic.  

Chairman Powell has made it clear that there is still room to hold rates, something that will no doubt send President Trump into a fit of rage. Data released since the FOMC’s last meeting on 17th – 18th June has given officials little reason to shift from their “wait and see” policy stance, which has been in effect since Donald Trump’s elevation to the White House. Whilst there will be a cornucopia of data between now and the September meeting of the FOMC, experts point out that the Jackson Hole Economic Symposium (in Kansas City) is being held between 21st – 23rd August. The Federal Reserve Bank of Kansas City hosts central bankers, policymakers, academics and economists from around the world, and Chairman Powell has been known to indicate forthcoming policy shifts, so perhaps financial markets and President Trump will get a peek into future Federal Reserve policy. 

The ECB Leaves Interest Rates Unchanged

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Today the ECB (European Central Bank) held interest rates steady with the key deposit rate* holding at 2%. To date, the ECB has cut interest rates eight times since June 2024 and President Christine Lagarde advised that the economy was now in a good place and growth is in line with projections or perhaps a little better. The president went on to say that having left interest rates unchanged that the ECB was now in a “wait and see mode” with the ECB shunning calls to reduce the cost of borrowing.

*Key Deposit Rate – The European Central Bank’s (ECB) key deposit rate is currently 2.00%. This rate is the interest banks receive when they deposit money with the central bank overnight. The ECB also sets other key interest rates, including the main refinancing rate (2.15%) and the marginal lending facility rate (2.40%). These rates are used to influence borrowing costs and economic activity in the Eurozone.

President Lagarde as advised above confirmed that the economy is growing in line with expectations however, she reminded the markets of the risks with the economy tilted towards the downside and said,” higher actual and expected tariffs, the strong euro and persistent geopolitical uncertainty are making firms more hesitant to invest”. She went on to say that “Wage increases are coming down and as growth has been developing in a relatively favourable way means we are now confident that the inflation shock of the last few years is behind us and our job is to look at what’s coming”.

The Vice President of the ECB Luis de Guindos, (previously Spain’s Minister of Economy, Industry and Competitiveness 2011 – 2018) warned growth will be almost

flat in Q2 and Q3 due to businesses front-loading to sidestep higher levies. Analysts and traders in the financial markets are betting that there will be one more rate cut before the end of the year with recent data released suggesting that a number of economists favour a rate cut at the next meeting on 11th/12th September. However, an executive member of the board Isabel Schnabel confirmed that the eurozone’s 20 nation economy is resilient and advised that the bar of another rate cut is very high. 

Despite the comments Schnabel financial market experts advise that the decision to hold rates could be breather before steeper cuts than currently predicted in order to prevent the eurozone’s economy from stalling and to block a period of deflation*. Indeed, the threat of deflation is in the air due to disinflation* being rampant across the eurozone, plus intensifying Chinese competition and the ongoing threat of tariffs from President Donald Trump and his administration. As President Lagarde mused, we certainly will have to “wait and see”.

*Difference Between Disinflation and Deflation – Disinflation refers to a decrease in the rate of inflation, meaning prices are still rising, but at a slower pace. Deflation, on the other hand, is a sustained decrease in the general price level of goods and services, meaning prices are actually falling.

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