* Decision on Sept. 16, 1200 GMT, followed by statement
* SNB seen keeping target for 3-mo franc LIBOR at 0.25 pct
* SNB not expected to resume FX interventions
* SNB may up 2010 GDP forecast, but also point to econ risks
By Catherine Bosley
ZURICH, Sept 14 (Reuters) - The Swiss National Bank is widely seen keeping its interest rate target steady on Thursday as a record rally in the Swiss franc and a slowdown of the global economy risk undermining a strong domestic recovery. The three-member SNB board, led by chairman Philipp Hildebrand, must counterbalance the threat of future inflation from a fast-growing economy and a booming housing market with potential deflation risks from a soaring Swiss franc.
The SNB will announce its rate decision, along with growth and inflation forecasts, at 1200 GMT, followed by a statement with its assessment of the economy and the inflation outlook.
Below are the main potential outcomes of the decision:
RATE TARGET UNCHANGED
Probability: High
The SNB is widely expected to keep its 3-month franc LIBOR
target unchanged at 0.25 percent and continue to allow the
euro-Swiss franc exchange rate to be determined by the market, a
Reuters poll showed last week.
Interest rate futures for Switzerland do not point to a tightening until mid-2011. <0#FES:>
SNB chairman Hildebrand warned in a newspaper interview in late August that risks to the economy had grown in recent months. [ID:nLDE67O1RL]
German ZEW investor sentiment fell more than forecast in September, suggesting a slowdown in economic momentum in Switzerland's main trading partner. [ID:nDEP003349]
"It remains too early to tighten monetary policy via rates despite the solid economic recovery," said Timo Klein, analyst at IHS Global Insight. "The sharply strengthening Swiss franc against the euro has already implicitly tightened policy, and global demand growth is weakening at present."
The franc soared to a historic peak against the euro earlier
this month
Nevertheless, the SNB, which has come under criticism in Switzerland for the losses on its euro holdings stemming from massive interventions, is not expected to reconsider its forays into foreign exchange markets. [POLL/SNB]
RAISE RATES
PROBABILITY: Very low
The SNB has warned of possible overheating in the housing market and, after the economy powered ahead in the second quarter, it looks likely to raise its 2010 growth forecast from the 'around 2' percent it gave in June.
Analysts polled by Reuters expect the central bank to raise the 2010 forecast to around 2.5 percent.
In addition, the SNB may be worried about inflation breaching its stability threshold of 2 percent in the mid-term. In June, it forecast inflation rates above 3 percent by 2013.
These factors could warrant a rise in the LIBOR target, which has been at rock-bottom since March 2009, the height of the financial crisis.
"The Swiss National Bank always indicated to markets that they would like to be more restrictive at times when the long-term inflation outlook is moving above their target of 2 percent," said UBS economist Reto Huenerwadel, who expects a 25 basis points increase in the SNB's rate target.
Most analysts expect the franc to jump to fresh record highs should the SNB raise its rate target.
RESUME INTERVENTIONS
Probability: Low
Given that the franc has been soaring against the euro and inflation remains close to zero, the SNB could again take up its pledge to intervene in foreign exchange markets, which it dropped at its June meeting.
Swiss consumer price inflation eased back to 0.3 percent in August and core inflation, which strips out volatile prices for food and energy, is at just 0.1 percent.[ID:nLDE68207W] "The SNB will keep its rates on hold on Thursday but may warn that it stands ready to intervene once again in currency markets if the Swiss franc appreciates too sharply," SEB economists said in a note.
"The SNB appears strong enough to take the risk of another substantial write down on increased holdings of foreign currencies," the SEB analysts said.
In the Reuters poll, 8 out of 27 analysts expected the central bank to resume interventions.
For a chronology of SNB rate moves click:[ID:nSNBCHRONO]
For a factbox on recent SNB comments click: [ID:nSNBQUOTES] (Editing by Mike Peacock)