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Swiss central bank cuts growth outlook

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Swiss central bank cuts growth outlook
Photo: Swiss National Bank
11:36 CEST+02:00
The Swiss National Bank on Thursday kept its low key rate unchanged and said the current global economic climate was forcing it to cut its 2012 economic growth outlook.

The SNB's target range for the franc's three-month London interbank offered rate (Libor) would remain unchanged at 0-0.25 percent, a bank spokesman said in a conference call with reporters.

The Swiss central bank also said that "as a result of the deterioration in the global economic outlook" and slight negative growth in the second quarter, it now expected the country's gross domestic product (GDP) for 2012 to tick in at 1.0 percent, compared to its previous estimate of 1.5 percent.

SNB also reiterated its determination to prevent the Swiss franc from gaining too much in value against the European common currency, and that it would work to maintain an exchange rate floor of 1.20 francs for each euro.

Investors unsettled by the eurozone debt crisis and uncertain US economic prospects have fled to the perceived Swiss safe haven, driving up the value of the franc to the detriment of the country's exporters.

"The SNB will not permit an appreciation of the Swiss franc, given the serious impact this would have on both prices and economic performance in Switzerland," the bank said in a statement.

The SNB will defend this floor "with all the determination necessary" by buying unlimited amounts of currency on the foreign exchange market, the bank spokesman said.

The central bank also reversed its inflation outlook for the current year, saying consumer prices were likely to rise 0.6 percent, and not fall 0.5 percent as previously expected.

SNB meanwhile expects inflation to stand at 0.2 percent next year, instead of the previously anticipated 0.3 percent, and 0.4 percent in 2014, compared to a previous forecast of 0.6 percent.

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