Swiss National Bank keeps ultra-loose policy, cuts inflation outlook

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By John Revill

ZURICH, Sept 20 (Reuters) - The Swiss National Bank kept its ultra-loose monetary policy in place on Thursday, citing the "fragile" exchange rate situation and rising international trade tensions and protectionism.

The SNB kept its target range for the three-month London Interbank Offered Rate (LIBOR) at -1.25 to -0.25 percent, as unanimously forecast by 36 economists polled by Reuters.

The central bank also kept the interest rate it charges on sight deposits at -0.75 percent, adding it remained ready to intervene in the foreign currency markets to counter a rise in the Swiss franc.

Both measures have been employed by the SNB to stem investor appetite for the franc over the last three and-a-half years.

The SNB maintained its description of the franc as "highly valued", adding the currency's recent strengthening illustrated how the situation on the currency markets was "fragile".

The central bank raised its expectations for the Swiss economy, saying it expected Swiss GDP to expand by 2.5 to 3 percent during 2018, up from its June forecast for growth of "around 2 percent".

The SNB said it still expected Swiss inflation of 0.9 percent this year. It lowered its inflation forecasts to 0.8 percent in 2019 and to 1.2 percent in 2020. It had earlier seen 1.6 percent inflation in 2020.

In recent weeks the franc has risen to its highest level since July 2017 as the safe-haven currency attracted interest due to concerns about Italy's budget and rising trade tensions around the world.

But the SNB has stayed broadly on the sidelines and not relaunched its currency market interventions to weaken the franc, whose strength weighs on Switzerland's export-orientated economy.

For a full text of the SNB statement see (Reporting by John Revill; editing by Brenna Hughes Neghaiwi and Michael Shields)