National bank holds interest rates

The Swiss National Bank has kept its key interest rates unchanged at 2.75 per cent, despite rising inflation, as risks to the economy loom.

The central bank said it decided on Thursday at its quarterly policy meeting to keep the rates steady for the first time after eight successive hikes.

It also said that it expected growth in gross domestic product this year of at least 2.5 per cent, and about 2 per cent in 2008.

The bank raised its inflation forecast for 2008 to 1.7 per cent from 1.5 per cent but lowered it for 2009 to 1.5 per cent versus 1.8 per cent previously.

“While this improved inflation outlook in the medium term is fraught with considerable uncertainty as a result of the persistent weakness of the Swiss franc and the increase in commodity prices, it nevertheless allows the National Bank to adhere to its monetary policy course,” the bank said in a statement.

The bank has voiced strong concern over the impact of the global credit crisis, pointing to risks from the financial sector, which accounts for 15 per cent of the Swiss economy.