–Adds Comments From Monetary Policy Assessment and SNB Head Hildebrand

ZURICH (MNI) – The Swiss National Bank on Thursday left its target
range for the three-month Swiss franc Libor unchanged at 0.0%-0.75% and
said it would continue targeting the lower end of the range at
approximately 0.25%.

The central bank confirmed its outlook for economic growth this
year at around 2% and edged up its projection for average inflation to
0.9% from 0.8% expected in March.

Inflation next year is seen averaging 1.0%, down from 1.1% expected
in March. For 2013, inflation is seen at 1.7%, down from 2.0%
previously.

“Over the course of 2012, the path of the new forecast is lower
than that of March because of the latest appreciation of the Swiss franc
and the slightly slower development of international growth,” the SNB
explained.

Nevertheless, inflation is still expected to surpass the SNB’s
comfort ceiling of 2% in the second half of 2013. “This shows that the
current expansionary monetary policy cannot be maintained over the
entire forecast horizon without compromising price stability in the long
term,” it reiterated.

The decision to keep interest rates on hold had been widely
expected, given the ongoing rise in the Swiss franc and still benign
domestic inflation.

“The SNB is concerned about exchange rate developments,” SNB
Chairman Philipp Hildebrand said in presenting the monetary assessment.
“The real export-weighted Swiss franc appreciated further in the second
quarter and has reached an all-time high.”

The franc also hit a fresh record high against the euro this week
after EU finance ministers were unable to agree on how to keep the Greek
government financially afloat.

Along with the downward revision for inflation in coming years,
this gives the SNB leeway to assess EMU debt crisis before beginning to
apply brakes to the economy. Some analysts expect a first tightening
move in the second half, although the markets appear less convinced.

“Despite the strong appreciation of the Swiss franc, the economy
continues to benefit from robust international demand,” the SNB said.
“However, margins in the export industry are coming under increasing
pressure.”

“Downside risks predominate,” it noted. “These include, in
particular, the debt problems in the euro area periphery.”

“In Switzerland, the main risks remain, on the one hand, the
effects of the strong Swiss franc on the export industry and, on the
other, the danger of overheating in the real estate sector.”

Domestic consumer prices were flat in May, which lifted the annual
inflation by 0.1 point to 0.4%. Core inflation has retreated from 0.8%
in March to a flat annual reading.

GDP growth slowed to 0.3% in 1Q from 0.8% in 4Q, as domestic demand
stagnated while rising inventories offset most of the big boost from
foreign trade. At the same time, exports remain dynamic despite the
appreciation of the franc and declining unemployment augurs a pick-up in
private consumption.

[TOPICS: M$$CR$,MN$RP$,M$$EC$,M$X$$$,M$$FX$]