The Fed leads a global rate cut by central banks

The Federal Reserve, the Bank of England and the European Central Bank led a coordinated rate cut effort as the official response to the biggest financial crisis since the Great Depression gathers steam. The official response in Europe and the U.S. has really stepped up. The U.S. central bank intervening in the Commercial paper market to lend directly to non-financial companies. The British government has decided to nationalise its banking system with targeted capital injections. And European governments have made sweeping deposit guarantees.

The only question is will this stem the tide? The monetary authorities certainly are taking aggressive action.

The Fed cut its benchmark rate by a half point to 1.5 pc, the central bank said in a statement. The ECB and central banks of the U.K., Canada, Sweden and Switzerland are also reducing rates, the Fed added.

“The recent intensification of the financial crisis has augmented the downside risks to growth and thus has diminished further the upside risks to price stability,” according to a joint statement by the central banks. “Some easing of global monetary conditions is therefore warranted.”

The move comes as the turmoil in financial markets deepens and the UK today unveiled a £500bn rescue package for the country’s banking sector.
The Telegraph

Federal Reserve, ECB and Bank of England make emergency interest rate cuts – Telegraph
Fed leads global coordinated rate cut, eases by half point – Yahoo
Central banks make emergency rate cuts – Times Online
Central banks cut rates to stem financial crisis – Reuters

  1. Stevie b. says

    Edward – the tide is indeed stemmed & I would hope today was definitely a climax bottom in the UK & hopefully elsewhere – we should see a multi-month relief rally.

    Am sad that the day after I complimented you on the links to your favourite blogs, they disappear!

  2. Edward Harrison says

    they’ll be back shortly. I was having site difficulties and had to re-create the sidebar last night.

    Stevie, let’s hope you’re right about an intermediate bottom being in the cards.

  3. Stevie b. says

    Edward – they are indeed back – a big thank-you!

    "Hope" in this whole fiasco may well be "plan B" & all we have left…

  4. Edward Harrison says

    And I expanded it to 10 blogs so you can see more at once. Thanks for reminding me to do that!

    Right now, I am looking back at my ten predictions and will post shortly.

    Cheers Stevie. Keep hope alive!

  5. Stevie b. says

    Edward – looks like the world is putting it’s “hope” in gold…

  6. Stevie b. says

    @ Wag the dog – & yet others say demand from the jewellery trade is tanking cos of the high price – & yet others say jewellery is being sold and melted at these prices – & yet & yet & yet…!

    I read this food for thought somewhere recently:
    "We looked into the abyss if the gold price rose further. A further rise would have taken down one or several trading houses, which might have taken down all the rest in their wake. Therefore, at any price, at any cost, the central banks had to quell the gold price, manage it. It was very difficult to get the gold price under control but we have now succeeded. The U.S. Fed was very active in getting the gold price down. So was the U.K."
    Eddie George, Bank of England, September 1999

    Personally think the technical stuff on gold looks like it's at a crossroads. Personally think politicians saying that "they'll do whatever it takes" is as dangerous as saying "this time it's different", in which case maybe…gulp…this time it is indeed different and -eventually- money will get trashed as politicians fulfill their promise.

  7. Wag the Dog says

    Stevie b. said, “looks like the world is putting it’s “hope” in gold..”

    I’ve read opinions on both sides. There are quite a few stories of shortages of physical gold on the high street and about how much of a premium people are paying for the stuff. This is taken to mean the paper contracts have been shorting gold depressing it’s price, but will eventually be brought into line upon expiry. Other stories say the increased high street demand will have only a tiny impact on overall demand. Others say the interest rate cuts will boost gold. Yet others say, money “velocity” is more important when it comes to inflation, not money supply. A lot of goldbugs cite M3 a lot. Those in the deflation camp say gold will eventually succumb and shorting gold is prudent. Then there are the history buffs citing the FDR gold confiscation towards the end of the great depression.

    Yup. There’s a lot of “hope” riding on this.

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