The Swiss National Bank has indicated a slight tightening of monetary policy, announcing that it will nudge interest rates higher amid signs of a continued economic upturn.

The Swiss National Bank has indicated a slight tightening of monetary policy, announcing that it will nudge interest rates higher amid signs of a continued economic upturn.

The SNB said it had decided to aim its three month London Interbank Offered Rate (LIBOR) towards the upper end of its 1.25 to 2.25 per cent target range instead of in the middle. The target range itself remains unchanged.

"This is an important change in our policy and that is why we wanted to communicate it to the markets," said an SNB spokesman.

The news was expected and broadly welcomed among analysts. "The market has anticipated a tightening from the SNB for a long time", according to Marcus Allenspach, an economist at Cantrade private bank.

"We have very good economic indicators in Switzerland. We have evidence that higher oil prices are translating into an acceleration of consumer and producer prices. The unemployment rate is at 2.5 per cent which is a several year low. So it has been widely anticipated and gives some comfort to the markets that the SNB is doing something," he said.

Targetting LIBOR is one of a host of policy innovations announced by the SNB in December aimed at a more transparent monetary policy.

It also said it would start using a three-year inflation forecast and a broad range of other economic indicators to determine monetary policy.

By Michael Hollingdale

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