Oct

10

Central Banks Come Together to Slash Rates

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In an unprecedented move, the US Federal Reserve, European Central Bank as well as four other Central Banks co-ordinated efforts to lower interest rates as a way of easing the finance crisis gripping markets across the globe.

Besides the Federal Reserve and European Central Bank, other central banks which came together to cut their benchmark rates by half a percentage point were Bank of Canada and Sweden’s Riksbank. The co-ordinated action also found support from Switzerland as well the Bank of Japan even though the latter did not participate in the rate cuts. In a separate move, China lowered it one-year lending rate by 0.25 percentage points.

This co-ordinated effort among central banks across countries to ease interest rates comes in the wake of the worst financial crisis since the Great Depression. The current global meltdown has sent stock indexes in the US crashing to the biggest annual decline since 1937 while Japan’s benchmark rate has seen the worst drop in around two decades.

After the recent cut, the Federal benchmark stood at 1.5% while ECB’s current rate is 3.75%. Canada’s benchmark rate fell to 2.5% and the main rate in UK dropped to 4.5%. China has ordered the second rate cut within three weeks, reducing it to 9.3%