Despite central banks very low key interest rates and application of unorthodox measures for several years, developed countries growth has stayed below the 2% mark since the Great Recession, compared with an average of nearly 3% from 1980 to 2007. Moreover, some of these measures, such as central banks use of negative interest rates (for example, the ECB s deposit facility rate is set at -0.40%), could have harmful indirect effects, especially on banks profitability.

The lack of private demand (consumer spending and investment) is often blamed for the weakness of the economic recovery more than seven years after the 2008-2009 financial crisis, despite the implementation of ultra-accommodative monetary policies.

This is why government use of fiscal stimulus is increasingly recommended, especially for countries where public debt is not too high. Furthermore, the newly elected US president promised massive tax cuts and an infrastructure investment programme to support growth and employment.

Central banks key interest rates: United States, Eurozone, United Kingdom and Japan










2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Federal Reserve European Central Bank

Bank of Japan Bank of England

Source: Bloomberg, Datastream.