Interest rates worldwide continue to tumble in the face of an ever-worsening outlook for the global economy. Japan’s central bank has just cut its key borrowing interest rate to 0.1 percent. The move was widely expected after the government had lowered its economic forecast.
The Bank of Japan’s governor, Masaaki Shirakawa, is reasonably optimistic. He said: “Our judgement is that there is a high possibility that the Japanese economy will remain sustainable in the long term. But, it’s outlook very much relies on movement in the global economy and we need to pay sufficient attention to such uncertainty.” Although the trend is overwhelmingly downwards, there is huge variation in interest rates around the world as different governments react in the way they think best to soften the effects of the recession. The lowest rates are in the largest and second largest economies – the US and Japan. In Europe the Swiss benchmark rate is now down to 0.5 percent; it’s at two percent in Britain and 2.5 percent in the euro zone. Among the highest are Russia and Brazil. For the US central bank, the Federal Reserve, cutting its short-term interest rate target to essentially zero was an unprecedented move. It is something which has been done before in Japan to try to boost economic growth with only limited success. Trying to get high street banks to lend more to individuals and businesses, Jean Claude Trichet and his fellow policymakers at the European Central Bank has just reduced the interest rate it pays those banks to deposit money with it overnight.