The scale of the world’s economic troubles has been underscored by more interest rate cuts around Europe.
The European Central Bank and the Swiss reduced their rates by 0.5 percent. The ECB rate is now 3.25 percent.
Britain’s Bank of England surprised economists with an unprecedented 1.5 percent rate cut.
The ECB is hoping to stimulate the 15 economies in the euro zone and limit job losses.
The bank felt it could afford to cut interest rates now as it no longer has to focus so much on inflation.
ECB President Jean-Claude Trichet said: “The outlook for price stability has improved further. Inflation rates are expected to continue to decline in the coming month. The intensification and broadening of the financial market turmoil is likely to dampen global and euro area demand for a rather protracted period of time.”
The Bank of England’s deep cut was in response to what it called: “A very marked deterioration in the outlook for economic activity.”
Some experts believe the state of Britain’s economy means the cost of borrowing there will drop below the present three percent, perhaps as low as one percent, matching the US.
Japan, with a moribund economy for years even before this crisis, recently cut its rate to 0.3 percent.
Even China has joined in efforts to counter the effects of the global crisis, cutting its main lending rate to 6.6 percent.
The central banks hope that by cutting the cost of borrowing they can reverse the collapse of confidence within the financial system get the banks lending again and prevent the economic slump deepening further, but investors were not convinced and Europe’s stock markets fell further on Thursday.