The long-term downward trend in interest rates globally and expansionary monetary policy occasioned by cyclical factors have therefore combined to produce historically low interest rates. Transmission channels of negative interest rates in Switzerland Irrespective of the equilibrium rate, questions arise regarding the transmission mechanism of monetary policy below the zero lower bound. Specifically, how does monetary policy using negative interest rates effect a rise in inflation? As you will probably remember from your student days, monetary policy usually operates through a variety of transmission channels. For a small open economy like Switzerland, the exchange rate channel is the most important. Lower interest rates, other things being equal, make the Swiss franc less attractive as an investment currency. The franc loses value, which makes Swiss goods cheaper abroad, and leads to a rise in net exports. This in turn raises GDP and inflation in Switzerland. Depreciation of the Swiss franc also has a direct impact on inflation because import prices rise. A reduction in interest rates also operates via the credit channel. Put simply, if the SNB reduces the short-term interest rate, longer-term market rates also fall. Loans become cheaper and this stimulates consumption and investment. These factors boost the economy and inflation rises. Page 4/16  Is the negative interest rate in Switzerland having the anticipated effect? Let me first look at transmission via the exchange rate channel. Historically, Switzerland has always had lower interest rates than most other countries, particularly euro area countries.
One prime example of this preventive work is the recent joint statements from the CNMV and the Banco de España warning the general public of the risks in relation to crypto-assets. Another example, specific to financial education, is the set of actions envisaged under the National Financial Education Plan. 1  We support this preventive work by exercising our corrective powers, wherever regulations and jurisdiction so allow, and by advocating legislative initiatives with regulators and legislators to remedy any shortcomings that we identify. The main strength of this protocol is that it deepens the cooperation needed to efficiently and effectively carry out our functions. This collaboration will also help to delimit each signatory’s respective field of action. Close cooperation between supervisors is particularly important in this domain, since we are often confronted with schemes that do not fit easily within a single regulatory field or sphere of competence. The idea is to avoid any grey areas where potential criminals can commit financial fraud. Not only are financial supervisors involved in the protocol, but so too are players as important and diverse as the public prosecution service, law enforcement authorities and associations representing notaries, registrars, the financial sector and the media. This, we are certain, will be a critical advantage in our efforts to combat financial fraud in both the preventive and corrective dimension. A warm welcome, then, to this initiative, which will have the Banco de España’s full support. 2