T AT&T Inc

BERN—The Swiss National Bank kept interest rates steady Thursday and reiterated its longstanding warning that the Swiss franc is significantly overvalued.

The SNB held its deposit rate at -0.75%, as widely expected by economists. The target range for the three-month Libor was left unchanged at a range from –1.25% to –0.25%

The decision came as the franc, which is considered a safe haven in times of global stress , faces renewed upward pressure. Financial market expectations that the Federal Reserve will be cautious in raising interest rates and, more pressingly, uncertainty over a looming referendum on the U.K.'s membership in the European Union have spurred flows into the franc.

SNB President Thomas Jordan said that Swiss policy makers are watching the U.K. developments closely, and will respond if needed. "Next week's UK referendum on whether to remain in the EU may cause uncertainty and turbulence to increase," he said.

The franc's strength complicates the SNB's efforts to boost inflation given export-dependent Switzerland's sensitivity to exchange rates, particularly against the euro.

Consumer prices were 0.4% below prior-year levels in May. While that was a smaller decline than in previous months, the lengthy drop in prices is a challenge for the SNB, which aims to keep inflation between zero and 2%.

The SNB upgraded its consumer price forecast for this year, and now expects a decline of 0.4% compared with an expectation of a 0.8% drop at its last meeting in March. It expects 0.3% inflation in 2017 and 0.9% in 2018.

The euro traded at 1.0828 against the franc early Thursday, and changed little after the SNB's rate announcement.

The franc has risen about 10% against the euro since the SNB abandoned in January 2015 a ceiling it had maintained for over three years on the franc's value against the euro.

Write to Brian Blackstone at brian.blackstone@wsj.com and Todd Buell at todd.buell@wsj.com

(END) Dow Jones Newswires

June 16, 2016 04:35 ET (08:35 GMT)

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