The Swiss franc fell on Thursday against the dollar and the euro after the Swiss National Bank (SNB) raised its benchmark interest rate by 25 basis points, defying market expectations for a larger increase.

The Swiss franc fell 0.2% to 0.8945 against the dollar after the SNB decision, moving away from a six-week high touched last week against the greenback.

The euro rose by as much as 0.28% against the franc to a session high of 0.9838 francs and was last at 0.9832 francs .

Despite an easing in Swiss inflation, currently the lowest among G10 economies at 2.2%, SNB Chairman Thomas Jordan recently repeated his readiness to raise rates, encouraging markets to expect a 50 basis-point hike.

Ahead of the central bank announcement, money markets were pricing in a 62% chance of a 50-bp SNB rise.

Economists polled by Reuters expected the SNB to hike rates by 25 bps. (Reporting by Joice Alves; Editing by Amanda Cooper)