A closer look at monetary policy

MMM KW16, 13th of April 2020

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© Adobe Stock
In order to limit the economic damage of the "corona crisis" as much as possible and to provide the economic cycle with sufficient liquidity (money), many central banks fall back on their securities purchase program (also called "quantitative easing" or QE in short). Under this program, central banks usually buy long-term government bonds or corporate bonds from commercial banks. The commercial banks can then provide companies with money at favourable conditions, which means easier refinancing for companies and lower default rates. We have summarized the steps taken by the major global central banks since the spread of the Covid 19 pandemic.


The key interest rate remains unchanged at -0.5 %, but a new purchasing program with a planned volume of EUR 750 billion has been launched. In addition, previously valid red lines were lifted: the central bank can now buy more than 33 % of a country's bond. Furthermore, these countries no longer have to meet the investment grade rating (good credit rating; keyword: Greece and possible downgrade of Italy). In addition, it is possible for the ECB to buy bonds of countries in financial distress to an unlimited extent.


The US Federal Reserve cut key interest rates by 150 basis points. The new interest rate level is now 0,25 %. In addition to the interest rate cuts, a program to purchase bonds and mortgage securities with unlimited volumes was also agreed.

Swiss National Bank – SNB

The SNB kept the key interest rate unchanged at -0.75 %. However, in order to relieve the banks, the allowance on which the banks do not have to pay negative interest rates was increased from April 1. In addition, the currency purchase program, which is basically intended to stabilize the country's own currency, will also be massively expanded. The CHF is very popular as a "safe" investment currency in times of crisis and is therefore appreciating. This is a burden on the export business, which is important for Switzerland.

Bank of Japan – BoJ

The BoJ is a pioneer in negative interest rates and purchase programs. In addition to bond purchases, the volume for the ETF purchase programme (Exchange Traded Funds - this also includes equity ETFs) was increased from 6 trillion to 12 trillion Japanese yen (EUR 101.88 billion) per year.
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