* Hildebrand says global recovery due to enormous stimulus
* Says sustainability of recovery uncertain
* Says can't keep rates low forever, but too early to exit (Adds details, background)
By Sven Egenter
BASEL, Switzerland, Sept 21 (Reuters) - The Swiss economy is still fragile despite encouraging signs and the Swiss National Bank has therefore decided to stick to its loose monetary policy, Swiss National Bank Vice-Chairman Philipp Hildebrand said on Monday.
"There have been an increasing number of encouraging signs recently but the situation in many parts of the economy remains fragile," Hildebrand said in a speech at an event of the Basel Society for Economics and Statistics.
"Against this backdrop, correcting monetary policy now would be too early," he said.
The SNB renewed its full set of drastic policy measures last week to support the economy and fight deflation. It kept interest rates close to zero, pledged to fight any rise in the Swiss franc against the euro and to buy bonds if needed.
In his speech about potential output and its importance for monetary policy, Hildebrand said uncertainties surrounding the economic outlook were extremely high.
Much of the current recovery globally was due to the unprecedented fiscal and monetary stimulus. "The question is how sustainable this can be," he said.
"We are in an environment of very large uncertainties," Hildebrand said. "We have to assess the situation quarter for quarter pragmatically without any preconceived opinion," he added.
While it was too early to exit the loose monetary policy, it was clear that the extremely expansionary policy could not be continued forever, Hildebrand said. "Our inflation forecast shows that."
In its quarterly assessment last week, the SNB forecast a fall in consumer prices by 0.5 percent this year but predicted a return to inflation rates above its 2 percent threshold for price stability by 2012.
The economic crisis had most likely hit potential growth -- the rate at which an economy could grow without stoking inflation pressures, Hildebrand said.
Switzerland may have fared better than other industrialised countries because it did not have a real estate market crash to deal with on top of the financial and economic crisis, he said.
Nevertheless, the Swiss economy may take longer to get back to full capacity utilisation than after previous recessions, Hildebrand said, echoing the assessment the SNB gave last week after its monetary policy decision. For more, pls see [ID:nSNBTEXT] (Reporting by Sven Egenter; Editing by Dan Grebler)