Geneva: Switzerland`s central bank held its key lending rate on Thursday but revised downwards its forecast for prices, warning that "deflation risks have increased once again".
In its latest quarterly update, the Swiss National Bank maintained its target range for the franc`s three-month London interbank offered rate, known as the Libor rate, at between 0.0 and 0.25 percent.
It also reiterated its commitment to maintain an exchange-rate floor of 1.20 francs to the euro, saying it had the "utmost determination" to stop the Swiss currency gaining any further value.
The bank "is prepared to buy foreign currency in unlimited quantities for this purpose", the SNB said, adding that if required, it "will take further measures immediately".
The central bank also revised downwards its conditional inflation forecast, warning of deflation over the next 12 months thanks in large part to low oil prices.
Inflation is expected to be flat in 2014, down from a previous estimate of 0.1 percent, and forecast to drop to -0.1 percent in 2015, down from an expected 0.2 percent.
In 2016, inflation is expected to rebound to 0.3 percent, against a prediction of 0.5 percent made in September.
The Libor rate, which is used to inform interest rates on mortgages and savings accounts, has now been at near zero for the past 40 months.
Jennifer McKeown, senior European economist at Capital Economics, said there was "still a good chance" that the SNB could apply a negative rate in the near future to help keep down the value of the currency.
But she said she expected further purchases of foreign currency "before long" as a more effective tool.
The Swiss franc is seen as a safe haven by markets and investors unsettled by the eurozone debt crisis and uncertain global economic climate flocked to the currency.
But the resulting rise in value risks damaging exporters, and in 2011 the bank set a rate -- 1.20 -- below which the franc should not fall against the euro.
Since then, the bank has intervened whenever necessary to protect the rate by buying up euros, most recently in 2012 when it purchased 188 billion francs worth.
Elsewhere, the SNB said it expected economic growth to be slightly higher than expected this year, up from 1.5 percent to between 1.5 and 2.0 percent, while next year it is expected to be around 2.0 percent.
