By Andreas Plecko and Ed Frankl
Switzerland's central bank on Thursday unexpectedly held its key interest rate steady at 1.75%, but signaled further tightening was still possible in its efforts to bring inflation to target.
Economists had expected a 25 basis-point hike, but the Swiss National Bank said tightening of monetary policy over recent quarters is countering inflationary pressure.
However, it said it would continue to monitor inflation closely, even as it has declined in recent months to 1.6% in August.
"From today's perspective, it cannot be ruled out that a further tightening of monetary policy may become necessary to ensure price stability over the medium term," the SNB said.
Central bank decisions have dominated markets over the past week. Also on Thursday, Norway's Norges Bank raised rates by 25 basis points, ahead of decisions from the Bank of England, Turkey and South Africa. On Wednesday, the U.S. Federal Reserve held steady, while the European Central Bank last week ticked up rates by a further quarter-point.
In its latest macroeconomic projections, the SNB said it expects annual inflation to average 2.2% in 2023, less than the 2.6% it previously expected, mainly due to the economic slowdown and slightly lower inflationary pressure from abroad. Inflation would then level out at 2.2% in 2024 before ticking down to 1.9% in 2025, therefore reaching its target of below 2%.
The SNB also continues to expect gross domestic product to rise around 1% in 2023.
Write to Andreas Plecko at andreas.plecko@wsj.com and Ed Frankl at edward.frankl@wsj.com
(END) Dow Jones Newswires
09-21-23 0442ET
