Central bank keeps interest rate on hold

The Swiss National Bank (SNB) has decided to maintain its expansionary monetary policy, leaving its key interest rate unchanged.

It is leaving the target range for the three-month Libor (London Interbank Offered Rate) at 0.00 – 0.75 per cent, and intends to keep this within the lower part of the target range at 0.25 per cent.

The central bank commented on Thursday that while the growth dynamic in emerging markets was vigorous, the recovery in the industrialised countries remained “modest overall”.

It noted in a statement that concerns about stability in the euro area had led to renewed financial market tensions, with the Swiss franc once again appreciating in value.

The SNB said average Swiss inflation was slightly below its September forecast.

For 2010 it is expected to amount to 0.7 per cent, for 2011 to 0.4 per cent and for 2012 to 1.0 per cent. But the bank said that the inflation forecast was associated with a “very high level of uncertainty”.

“The implication for Switzerland is that the Swiss franc will remain a safe haven currency,” commented Julien Manceaux, an analyst at financial services group ING.

“There is a risk of further appreciation and the SNB doesn’t have any weapons to counter this anymore as forex (foreign exchange) reserves are already high.”