The Swiss National Bank (SNB) has lowered its three-month Libor target range by 50 basis points to 0.0 – 1.0 per cent, effective immediately.
The SNB said Gross Domestic Product growth would be negative next year, falling to between –0.5 and –1 per cent.
In a statement, the SNB said it was prepared to "take all necessary steps" to support the Swiss economy in the face of the deteriorating global economic environment.
The SNB "will continue to provide the Swiss franc money market with a generous and flexible supply of liquidity", it said.
"The unfavourable economic outlook and the falling oil price have prompted a radical adjustment of the inflation forecast. Inflation will undergo a substantial decline over the course of next year, and will remain low thereafter," it added.
Switzerland would be heavily affected by declining economic activity in both the United States and Europe and the slowing situation in Asia.