ZURICH--Switzerland's central bank kept a key deposit rate at -0.75% and reiterated it will intervene in currency markets if necessary to blunt the strength of the Swiss franc, which it said remains "significantly" overvalued, despite easing in recent weeks.
The Zurich-based Swiss National Bank said Thursday it was maintaining the negative rate on sight deposits. The rate is in effect a 0.75% charge it applies to deposits from commercial banks.
The central bank also held its target range for the three-month London Interbank Offered Rate, or Libor, at -1.25% to -0.25%, a decision widely expected by economists.
The negative interest rates are part of the SNB's strategy for combating the strength of the franc, which is seen as a haven in times of economic uncertainty, by diluting the currency's appeal to foreign investors.
"Negative interest rates in Switzerland make holding investments in Swiss francs less attractive and will help to weaken the Swiss franc over time," the bank said in a policy statement.
Thursday's decision, which was widely anticipated by markets, marks the SNB's third policy statement since it scrapped a 3 1/2-year policy of limiting the franc's gains to 1.20 per euro in January. The policy had been part of efforts to protect the country's exporters, many of which are now cutting pay and moving work abroad as they grapple with the strong currency.
"The negative rates have helped push the franc down toward 1.10 per euro, but there is no need for the SNB to adjust their policy as a result of these developments," said Dominik Studer, an economist UBS.
The SNB acknowledged the franc remained a burden and said it would "remain active in the foreign-exchange market as necessary."
The central bank also lowered its inflation outlook for this year and next due to weaker oil prices, and said it only expects prices to pick up in 2017.
The SNB forecast gross domestic product growth of "close to 1%" for 2015, compared with its projection of "just under 1%" in June.
The decision comes as the Swiss economy shows signs of weathering the impact of the strong franc better than many analysts had expected.
Still, the SNB warned that the global economic recovery is "fraught with risks," and while it expects Swiss growth to pick up gradually in the second half of the year, the situation "remains challenging for many companies."
Demand for Swiss goods from the 19-nation bloc slid 8% in the first half of the year, with the country's machinery and electrical goods industry among the hardest hit, according to data from the Federal Customs Office.
Watchmakers including Swatch Group AG have been particularly vocal about the high value of the franc, and have raised their prices in the eurozone to compensate, while other companies like dental implant maker Straumann Holding AG cut wages and executive pay.
"The franc is still making life difficult for us, and we are very focused on managing our costs and doing what we can to reduce the strong franc's impact," said Mark Hill, a spokesman for Basel-based Straumann, where the currency effect reduced its first-half sales growth by more than six percentage points.
The company said cost-cuts are helping it manage the franc's rise.
