Central bank holds interest rate steady

The Swiss National Bank (SNB) has decided to keep interest rates steady with a target rate of 0.25 per cent for the next three months.

The three-month Libor range will remain unchanged at 0-0.75 per cent.

Also on Thursday the central bank revised economic growth predictions upwards from 1.5 per cent to around 2.0 per cent. It does not believe this will result in excessive inflation this year or next.

Growth is forecast to pick up in Switzerland this year, but will continue to be held back by the underperforming export market that has been hampered by the rise of the Swiss franc against the euro.

Inflation rates are tipped to amount to 0.9 per cent this year and one per cent in 2011. However, the SNB warned on Thursday that inflation could speed up to 2.2 per cent in 2012, hinting at a future interest rate rise.

“The current expansionary monetary policy cannot be maintained over the entire forecast horizon without compromising medium and long-term price stability,” the SNB cautioned in a statement.

The SNB added that deflationary risks from the appreciating Swiss franc had “largely disappeared”, hinting that further intervention in the money markets could be toned down.

However, the central bank admitted that its forecasts have been made in a period of “very considerable uncertainties” and repeated earlier statements that it would act to stabilise the franc if necessary.

swissinfo.ch and agencies