SNB To Gradually Hike Interest Rates - Blattner
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BERN (Dow Jones)--The Swiss National Bank (SNBN.EB), or SNB, will continue to gradually raise interest rates if economic growth develops as expected, the central bank's vice-president Niklaus Blattner said Friday.
"The inflation forecast of the SNB from March made clear that the current low interest rate level isn't compatible with the price stability over a longer period of time," SNB's Blattner, who is a member of the central bank's policy setting body, said in a statement made available ahead of a conference in Basel, Switzerland.
He said since the SNB's last assessment of Switzerland's economic growth prospects in March, the outlook has improved further - excluding a recent surge in oil prices.
The SNB hiked rates 25 basis points in March to 1.25%, the middle of the band the central bank targets for its benchmark interest rate, the three-months Swiss franc Libor.
In the short term, the recent acceleration in economic growth won't endanger price stability, Blattner said, adding he expects 2006 inflation to be moderate.
At the central bank's last meeting in March the SNB raised its full-year inflation forecast to 1.0% from 0.8%.
While 2005's economic recovery was mainly export-driven, SNB's Blattner said he expects this year's economic growth to be supported by rising domestic demand. The SNB predicts the Swiss economy to grow slightly more than 2% this year.
This will also lead to a further decline in the Swiss unemployment rate, from 3.5% in March, Blattner said.
Comments made last week by SNB's chairman Jean-Pierre Roth's about the weakening Swiss franc prompted investors to think the SNB may hike rates earlier than expected, possibly at its upcoming meeting in June.
SNB Web site: snb.ch
-By Stefanie Weitz, Dow Jones Newswires; +41-43-443-8048; stefanie.weitz@dowjones.com
(END) Dow Jones Newswires
May 05, 2006 05:00 ET (09:00 GMT)
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