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Thursday, the Swiss National Bank left its three-month libor target range unchanged at 0-0.75%, as expected. In effect, the bank kept its key interest rate unchanged at 0.25% for the second rate setting session.
The central bank said it will continue providing a generous supply of liquidity and, if necessary, to purchase Swiss franc bonds with a view to reducing risk premia on long-term debt instruments issued by private sector borrowers.
In addition, it will continue to act decisively to prevent any appreciation of the Swiss franc against the euro.
Citing the signs of improvements in the global economy, the SNB revised its GDP growth forecast for the current year. It now expects Switzerland's real GDP to fall by between 1.5% and 2%. That compares with a June prediction of a GDP fall between 2.5% and 3%.
"Growth is likely to pick up again gradually during the months ahead," the central bank said.
The SNB also revised its inflation outlook for 2010 and 2011. According to the latest forecast, average annual inflation for 2009 would be negative, at 0.5%. Prices are expected to rise 0.6% in 2010 and 0.9% in 2011.
But, the central bank warned that this inflation forecast is associated with major risks. It said the recovery anticipated in the global economy may fail to materialize.
Moreover, although the financial industry is well into the process of recovery, another deterioration cannot be entirely ruled out. "A risk of deflation therefore remains."
In June, the central bank had said inflation would be at negative 0.5% this year. It is predicted to move to 0.4 in 2010 and to 0.3% in 2011.
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