The central banks are acting very differently at the present time. The spectrum ranges from an extraordinarily expansionary monetary policy, to a withdrawal from special monetary policy measures, to an even almost “neutral” monetary policy. In December, the Fed raised its benchmark interest rate for a fourth time in 2018. It raised the interest rate by a quarter of a point to the new target corridor of 2.25 to 2.5 per cent as a reaction to the good economic situation in the USA. The Fed has signalled a more gradual rise in rates for 2019. Nevertheless, a further interest rate hike will probably be made in 2020. The US central bank also indicated a long-term interest rate of 2.8 per cent.
In comparison, the monetary policy of the ECB continues to be very expansionary. Key interest rates should remain at their present record low level until probably beyond the summer of 2019. In December 2018, however, the ECB decided to stop its bond purchasing programme at the end of 2018. It wants to gradually withdraw the programme, but continue to invest the accruing interest income from the programme in bonds. The end of the bond purchasing programme can be regarded as a first step on the long road towards normalising monetary policy.
The Swiss National Bank (SNB) still left its interest rates unchanged. The markets are assuming that it will only initiate an interest rate turnaround after the ECB has taken the first step. With a negative interest of 0.75 per cent and its readiness, if necessary, to intervene in the foreign exchange market, the SNB’s policy remains extremely expansionary. An end to negative interest rates is not expected before 2020.