International monetary policy 2005

December 6, 2004
19. Internationales Zinsforum - Zinsen 2005, Frankfurt am Main

Summary

The major central banks reacted to the lacklustre global economy in 2002 by relaxing the monetary policy. The low money market rates in 2002 and 2003 were appropriate for a recession. They are not, however, indicated for a sustained and global upswing. This is why several central banks began to steer their monetary policy back to a normal course in 2003 and 2004. The tempo of monetary policy normalisation obviously depends on the progress of economic recovery, which leads to different reactions in each country.

In this rather favourable climate, oil prices began to soar in 2003. However, there is no reason to fear a repeat of the dire consequences witnessed during past oil crises. On the one hand, the rise in oil prices comes at a time when the economic environment is much more stable than it was back then. On the other hand, strong global economic growth drives up oil prices.

In order to ensure price stability, a normalisation of economic activity must be accompanied by a normalisation in the interest rate policy. The latest oil price hike has no bearing on this basic premise. The constellation of a weaker growth dynamic and higher oil prices could, however, delay getting monetary policy back on track. Since central banks are committed to the goal of price stability, a lot will depend on the transmission of oil price increases to inflation expectations. In most industrialised countries, inflation expectations give no cause for concern for the time being. Low inflation expectations and flexible monetary policy concepts allow central bankers to carefully adjust their monetary policy for 2005, provided that it seems appropriate for business cycle reasons.

Download file now

The file can be downloaded with the button below.

Additional files

Related content

Author(s)

  • Jean-Pierre Roth
    Chairman of the Governing Board

Your settings

Required: These cookies (e.g. for storing your IP address) cannot be rejected as they are necessary to ensure the operation of the website. These data are not evaluated further.
Analytics: If you consent to this category, data such as IP address, location, device information, browser version and site visitor behaviour will be collected. These data are evaluated for the SNB's internal purposes and are kept for two years.
Third-party: If you consent to this category, third-party services (used, for example, to add social multimedia content to the SNB's website) will be activated which collect personal data, process these data, disclose them abroad - worldwide - and place cookies. The relevant data protection regulations are linked in the 'Privacy statement for the website of the Swiss National Bank'.

Choose your preferred settings:

This website uses cookies, analytics tools and other technologies to provide requested features, content and services, to personalise the content shown, to provide links to social media, and to analyse the use of the website in anonymised form for the purposes of improving usability. Personal data are also disclosed abroad - worldwide - to video service providers and the analytics tools of these providers are used. More information is available under 'Manage settings'.