Like other central banks, we too are committed to establishing a standard for worldwide rules on foreign exchange market practices. Within the framework of the Swiss FX Market Roundtable, a broad spectrum of market participants has been working with the SNB to develop a global standard ‘FX Code of Conduct’. I would like to take this opportunity to thank these market participants for their contributions. Longer-term correlation between monetary policy and financial markets Ladies and gentlemen, I now come to the last part of my speech, where I would like to talk about the longer-term interactions between monetary policy and financial markets. Through their monetary policy measures, central banks influence financial market prices. To what extent this influence is stronger today than it used to be is the subject of a number of studies. Indeed, we observe that some traditional relationships and correlation patterns on the financial markets have changed in recent years. This is illustrated in chart 5. It shows the correlations between the prices of seven asset classes, including equities, government bonds, corporate bonds and commodities. The blue bars show the distribution during the period 2000 to 2007, before the financial crisis and during a period of conventional monetary policy, while the red bars depict the observed distribution since 2010. It is clear that the correlation between asset prices has significantly increased since 2010. There are various explanations for why financial market prices globally are moving more in unison.
It is not possible to determine precisely where this lower bound lies, but we are confident that we still have some room for manoeuvre to lower interest rates further, if necessary. Second, the transmission of negative interest to the financial system and the economy has some peculiarities. In our experience, the transmission to the money and capital markets of an interest rate change in negative territory operates in the same way as one in positive territory. 8  9  For instance, a study by the International Monetary Fund shows that the unconventional measures taken by the Federal Reserve at the height of the financial crisis played a decisive role in calming the markets. Cf. Roache, S. K. and M. V. Rousset (2013), Unconventional monetary policy and asset price risk, IMF Working Paper, WP/13/190, August 2013. For the lessons learnt from the financial crisis and proposals for future monetary policy frameworks, cf. Bindseil, U. (2016), Evaluating monetary policy operational frameworks, paper presented at the Economic Symposium of the Kansas City Fed, Jackson Hole, August 2016. Page 5/8  An example of this is the continued efficient operation of the repo market. By contrast, the transmission of negative interest in the banking system is varied. As interest rates on bank deposits largely remain at zero, lending rates, particularly mortgage rates, have also fallen less sharply than money and capital market rates. From the SNB’s perspective, this imperfect transmission to lending rates is not entirely unwelcome in the current economic environment.