Swiss National Bank keeps key interest rate target unchanged at 0.25 percent

Swiss keep key interest rate unchanged at 0.25 pct

GENEVA — The Swiss National Bank said Thursday it would keep its key interest rate target at the record low of 0.25 percent, citing the current strength of the Swiss franc and low risk of inflation.

The three-month interest rate band remains at zero to 0.75 percent, the range set by the SNB in March 2009.

The central bank’s decision had been closely watched this quarter due to the recent surge in the value of the franc against the U.S. dollar and the euro.

Raising the interest rate could have further lifted the franc — already seen as a safe haven currency — by making it an even more attractive investment for savers.

Experts had also warned that a higher interest rate would have worsened already crippling repayments for Eastern European consumers who took out loans in francs when the Swiss currency was worth less than its current high.

The franc traded at just under $1 Thursday, while the euro conversion rate hovered at about 1.3 francs.

The SNB said it expects the Swiss economy to grow by 2.5 percent this year. It gave no estimate for 2011 but predicted “a marked slowdown in growth” if the franc continues to surge even as the global economic recovery falters.

Inflation is expected to remain low, despite the favorable interest rate. The SNB’s forecast pegs inflation at under 1 percent through 2011.