With the Federal Reserve in Washington leading the way, seven central banks around the world have cut interest rates in unison. It is the first ever such coordinated emergency move and comes in response to the worst financial crisis in nearly 80 years and fears of a global recession.
The unscheduled cuts followed consultations between central bankers and politicians on the best way to turn around slumping financial markets. The benchmark rate in the US is now 1.5%. The euro zone rate goes down to 3.5%, the UK rate is at 4.5% and the Canadian and Swiss central banks’ rates fall to 2.5%.
Also down Sweden to 4.25% and China cut its rate by 0.27%. At the same time, the British government pledged as much as 64 billion euros to bolster banks’ balance sheets.
Reuters financial markets editor Mike Dolan said: “All of these together are likely to draw a line under this somewhere, It would be a brave person to say exactly when, but this is very significant because of its coordinated nature and I think most people would assume that it is an international problem, it is a global problem and it needs a global solution.”
The cuts followed days of calls from economists and world leaders for concerted action after repeated attempts by central banks to inject liquidity into world markets failed to halt the crisis of confidence.