* SNB signals further rate cuts; cuts growth, inflation forecasts
* Says franc still overvalued; to remain active in market
* Rate on some cash deposits kept steady at -0.75 pct
* Keeps three-month Libor target at -1.25 to -0.25 pct (Recasts with quotes, detail)
By Alice Baghdjian
ZURICH, March 19 (Reuters) - Switzerland’s central bank said it would stay active in markets to weaken an overvalued franc as it cut growth and inflation forecasts, while tumbling exports suggested the soaring currency was already weighing heavily on the economy.
At Thursday’s policy meeting, the Swiss National Bank also said its benchmark interest rate target, which it held unchanged, are set to remain in negative territory for the time being.
That signalled no early change to the SNB’s ultra-loose policy stance, keeping it in lockstep with a flurry of monetary easing in other developed economies - also plagued by low or negative inflation and growth rates - that has stoked fears of a currency war.
The franc has soared since the SNB unexpectedly ditched its 1.20 cap against the euro in mid-January, giving up a struggle to rein in the currency that one board member said would have cost it around 100 billion francs in that month alone.
It now trades at around 1.06 francs to the euro , increasing the relative cost of sales of goods abroad for an economy that is heavily dependent on exports.
Swiss exports fell by an annual rate of 3.9 percent last month, data showed on Thursday.
The SNB acknowledged the pressure it faces at home, where firms have shortened working hours, cut jobs and lowered pay to save money since the cap was removed.
At Thursday’s policy meeting it kept its charge on major cash deposits at the central bank at 0.75 percent. It also held its target range for the three-month Libor rate at -1.25 to -0.25 percent, as analysts polled by Reuters had expected.
The negative rates, supported by potential SNB interventions in the currency market, are aimed at deterring investors from piling into the franc since the European Central Bank started printing money under a 1-trillion-euro bond-buying programme.
“Overall, the Swiss franc is significantly overvalued and should continue to weaken over time,” bank chairman Thomas Jordan said in a speech. “(The SNB) ...will therefore remain active in the foreign exchange market, as necessary.”
As well as the ECB’s quantitative easing programme, which has sent the euro to multi-year lows, Sweden cut rates further below zero last week while the Bank of England’s chief economist said on Thursday it should be ready to cut again if inflation falls sharply.
Furthermore, the Federal Reserve on Wednesday reduced its forecast for the path of the federal funds rate and economic growth, sending the dollar lower.
All that suggests further upward pressure on the franc, which seems unlikely to give a lift to an economy the SNB now expects to grow just less than 1 percent rather than the 2 percent it forecast before the cap was removed.
The central bank also predicted prices would fall 1.1 percent in 2015, which would be the steepest fall since 1950, according to Federal Statistics Office data.
“In the current environment, the SNB sees no real alternatives to negative interest rates,” said SEB economist Thomas Koebel. (Writing by Katharina Bart, Additional reporting by Mike Shields and Maria Sheahan; Editing by Kevin Liffey and John Stonestreet)