LONDON (Reuters) -In a big day for central banks across Europe on Thursday, Switzerland shocked markets by leaving its interest rates unchanged, while Sweden and Norway met expectations with a quarter-point hike each.

The Swiss National Bank held its key rate unchanged at 1.75%, against analyst expectations for a quarter-point increase, but said further tightening could not be ruled out.

Sweden's raised its key policy rate by a quarter of a percentage point to 4%, as expected, and said it might need to do more to bring inflation back to its 2% target.

And in Norway, the central bank raised its benchmark interest rate by 25 basis points to 4.25% to curb inflation, as widely predicted, and, in a surprise move, said it would likely hike again in December.

The Bank of England unveils its rate decision at 11:00 GMT.

MARKET REACTION:

SWITZERLAND: The Swiss franc fell sharply after the SNB rate decision and was last down almost 0.8% against the dollar at 0.9044. It was down 0.7% against the euro and set for its biggest one-day drop since March, when turmoil engulfed the Swiss banking sector.

Swiss 10-year bond yields jumped 18 bps to 1.26%, their highest since April.

SWEDEN: The Swedish crown rallied and was last up 0.6% against both the euro and the dollar, gaining some respite from a recent battering that has seen the currency slide to record lows against the euro.

NORWAY: The Norwegian crown edged higher against the euro and the dollar. It was last up 0.3% at 11.48 per euro.

COMMENTS:

ADRIAN PRETTEJOHN, EUROPE ECONOMIST, CAPITAL ECONOMICS, LONDON:

"The decision was certainly surprising, given that (SNB chief) Thomas Jordan has previously signaled that rates probably needed to be hiked further and that since that comment inflation has developed how the SNB expected."

"Indeed, they didn’t change their inflation forecast for 2023 and 2024. Overall, we interpreted it as a hawkish pause, although that is about as dovish as the policy decision and statement could have been."

"The decision means that we are expecting 1.75% to be the peak rate for the SNB’s policy rate, but hasn’t changed our view that inflation will be around 1% in 2024, about half the rate that the SNB is forecasting."

CHARLOTTE DE MONTPELLIER, SENIOR ECONOMIST, ING, BRUSSELS:

"I find that the message overall is rather dovish, with the phrase 'the significant tightening of monetary policy in recent quarters is helping to counter persistent inflationary pressure', the fact that they insist on the deterioration in the economic outlook and of course the inflation forecasts."

"The revision of inflation forecasts is very clear, and already from H2 2024. The fact that inflation is now expected to be 1.9% throughout 2025 and 2026 changes the picture in my view. Against this backdrop, I believe that the monetary tightening cycle has come to an end, with no further rate hikes."

KARSTEN JUNIUS, CHIEF ECONOMIST, BANK J. SAFRA SARASIN, ZURICH:

"Great decision of the SNB that demonstrates its independence of the ECB and other central banks. As we predicted, it left its policy rate unchanged, as inflationary pressures have moderated, the Swiss franc has appreciated and the economy is showing signs of slowing down."

"We also welcome the communication of the SNB, indicating that another rate hike is possible. Hence, the SNB opted for a hawkish pause rather than a dovish hike which keeps up the tension in money markets such that the there will not be a discussion when the first rate hike comes."

JAN VON GERICH, CHIEF MARKET ANALYST, NORDEA, HELSINKI:

"The main message still is that we are close to the peak."

"The weakening growth outlook is becoming more visible and inflation is coming down, so it's a fine balance act for central banks."

"The SNB has not been as keen, as the say, the Fed, in doing what the market is expecting."

"For the Riksbank, the weak currency is one reason why they are hiking interest rates."

(Reporting by the Markets Team and John Revill in Zurich; Compiled by Dhara Ranasinghe; Editing by Amanda Cooper)