Wednesday, October 08, 2008

Global Coordinated Interest Rate Cut

As most of you have probably already heard, several of the largest central banks today all cut their formal interest rate by 50 basis points (0.5%:points). Among those included were the Fed, the Bank of Canada, the Bank of England, the ECB, the Swedish Riksbank and the Swiss National Bank. In addition, the Chinese central bank reduced its target rate by 0.27%:points (the Chinese like using numbers that can be divided by 0,09). The Bank of Japan didn't participate but issued a statement expressing support for the action, and the Reserve Bank of Australia had of course already implemented a full 100 basis point cut.

At least in the case of the Fed, and probably some of the others too, this move won't have much of an impact as they had already implemented de facto interest rate cuts. The main effect will be psychological, although that might not be meaningless considering how the dramatic market movements recently have been driven by increased fear. It will certainly not even be close to ending the crisis, though.

2 Comments:

Anonymous Anonymous said...

If you read the articles in the business new you will notice that inflation is higher than expected in Sweden and still they cut the interest rate... Looks like the swedish krona will lose strength against other currencies.

10:05 AM  
Anonymous Anonymous said...

They cut rates because they believe that it is risk free under the current circumstances of deflationary pressure.

This is verry good news for the stock market and SEK is undervalued and will rise against the Euro.

Göran
Sweden

1:21 PM  

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