Rate Cuts Around The World As Britain Launches Trillion Dollar Bailout

THE world’s major central banks last night [together for the first time in history] followed the Reserve Bank of Australia and cut interest rates in a co-ordinated effort to ease pressure on a still gridlocked global financial system.

Rate cuts by the US Federal Reserve, Bank of England and central banks in China, Europe, Canada, Sweden and Switzerland followed a $1.23 trillion rescue package in Britain which included the part-nationalisation of England’s eight biggest banks.

Within hours of the British bailout being announced, the Bank of England cut official interest rates by 0.5 of a percentage point to 4.5 per cent as part of the co-ordinated global effort. The US Fed reduced its key rate from 2 per cent to 1.5 per cent.

French President Nicolas Sarkozy said co-ordinated action was the only way to confront an “unprecedented financial storm”.

The move was designed to restore confidence and limit the spread of the crisis from financial markets to the real economy. The IMF yesterday cut its forecast for world growth next year to 3per cent, with growth of close to zero in industrialised countries. It warned it could fall much further, but it expects developing countries to maintain reasonable growth levels.

Cutting interest rates can stimulate economic growth and help restore confidence to markets. But doing so may undermine a currency as investors look for better returns elsewhere. The U.S. rate is now the second-lowest among the majors, higher only than Japan.

In other New York trading, the dollar fell to 1.1041 Canadian dollars from 1.1058, and slipped to 1.1340 Swiss francs from 1.1378.

Source – Australia Press Reports

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One Response to Rate Cuts Around The World As Britain Launches Trillion Dollar Bailout

  1. Pingback: Rate Cuts Around The World As Britain Launches Trillion Dollar Bailout · Trading-Stocks.ExplainedHere.Net

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