Swiss National Bank surprises with negative interest rate

The Swiss National Bank (SNB) surprised on Thursday with imposing a negative interest rate of 0.25%.

Switzerland's central bank said that it took the action “with the aim of taking the three-month Libor into negative territory, expanding it's target range for to its usual width of one percentage point at -0.75% to 0.25%.

The SNB reaffirmed it's commitment to the floor in the exchange rate of 1.20 Swiss francs(CHF) per euro and noted that it will “continue to enforce it with the utmost determination” and explained that this target remained the key instrument to avoid an undesirable tightening of monetary conditions.

The introduction of negative interest rates makes it less attractive to hold Swiss franc investments which in turn helps to support the minimum exchange rate that the SNB established against the euro.

The Swiss franc sank on the news with the CHF with the USD/CHF trading up 0.7111% to 0.9808.

Meanwhile, the Swiss government cut its 2015 forecast for gross domestic product growth to 2.1% from the prior 2.4% and halved its estimate for inflation to 0.2%