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Expect a pause for many global central banks

Key central banks are generally expected to pause interest rate movements over the coming months after a surprisingly active 2019 that saw interest-rate cuts in the US, Europe, and many central banks in Asia. "The very relaxed monetary policy around the world, especially in the US and Europe, has left policymakers with very little room for maneuver," says Credit Suisse economist Maxime Botteron in the podcast. However, the central banks and their policies should not be ignored either. The Federal Reserve and the European Central Bank are currently reviewing their strategies. Meanwhile, a 2019 report from the Swiss National Bank highlights the large, income-generating balance sheets that were built up in the past decade.


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Central banks in developed economies are generally expected to pause interest rate movements after a surprisingly active 2019 that saw interest-rate cuts in the US, Europe, and many central banks in Asia.

In the latest Credit Suisse podcast, hosted by senior advisor Brian Blackstone, Credit Suisse economist Maxime Botteron says the European Central Bank and Federal Reserve will likely focus on broader policy reviews.

"We don't expect any changes in policy rates from the major central banks in the US, Europe, Japan, or Switzerland," says Botteron. A trio of interest-rate cuts last year left US policy rates low (but still positive) at the end of 2019. Rates in much of Europe and Japan are negative.

"We are in an environment where monetary policy is already very loose, thus limiting room for maneuver with regard to policy rates"

Maxime Botteron

Still, this doesn't mean central banks can be ignored. China's central bank eased its monetary policy at the start of January. And the Swiss National Bank recently reported a profit of CHF 49 billion in 2019 – equal to approximately 7% of Switzerland's entire gross domestic product.

The Swiss report reflects one byproduct of the emergency measures taken by central banks in the past decade to shore up their economies: large balance sheets that generate income for central banks.

What sets Switzerland apart is the volatility of its earnings, because most of its balance sheet – worth over CHF 800 billion – is held in foreign stocks and bonds in order to weaken the Swiss franc.

For this reason, the SNB caps the amount of money it distributes to the federal government and cantons at roughly CHF 2 billion.

"If we think a bit longer term, I think there is potential for a larger distribution," says Botteron.