Global economic growth is being driven above all by the very expansive monetary policy. In the developed countries and emerging markets interest rate levels are still at extremely low levels. Moreover, in recent years the large central banks in the developed countries have provided support for overall economic demand by implementing large-scale quantitative easing measures.
In mid-December 2016, the US Federal Reserve increased key base interest rates by 0.25 percent on the range from 0.5 to 0.75 percent and continued its course of normalising monetary policy. Three further interest rate rises are expected in 2017. Since the increase in the base rate, the US dollar exchange rate has reached new highs while the euro has lost in value.
As a result of the latest increase in interest rates in the USA, the interest differential with Europe has widened further. On 14 December 2016, the European Central Bank (ECB) announced that it would extend its bond purchasing programme beyond March 2017. Zero interest rates have now been in effect in the euro zone since March 2016. Moreover, banks must pay penalty interest on deposits; at the end of the year this so-called deposit facility rate stood at minus 0.4 percent.
In its currency deliberations, the Swiss National Bank is mainly looking to Frankfurt. It will probably continue to play a waiting game and hold interest rates in Switzerland in the negative range. In 2016, the target range for three-month LIBOR lay between minus 1.25 and minus 0.25 percent, the (penalty) interest on bank sight deposits stood at minus 0.75 percent.