Central bank maintains interest rate

The Swiss National Bank (SNB) will maintain its benchmark interest rate at current levels despite stronger-than-expected growth by the global and Swiss economies.

The SNB said it would maintain its target range for the three-month Libor rate (London Interbank Offered Rate) at 0.0 per cent to 0.75 per cent, which it intends to keep in the lower range of 0.25 per cent.

The SNB said rising oil prices, more dynamic domestic growth and a positive outlook for the global economy had led it to raise its forecast for inflation in 2011.

In December, the bank forecast inflation at 0.4 per cent for 2011, rising to one per cent in 2012. It is now forecasting inflation to rise to 0.8 per cent for the year, increasing to 1.1 per cent in 2012 and two per cent in 2013.

“The rising path in 2012 and 2013 shows that the current expansionary monetary policy cannot be maintained over the entire forecast horizon without compromising price stability in the longer term,” the bank said in a statement. “The conditional forecast is associated with a very high level of uncertainty.”

The SNB said it expects Swiss economic growth to weaken throughout 2011 due to competitive pressures on export firms resulting from the strong franc. It forecasts Gross Domestic Product (GDP) to grow by two per cent in 2011.