US Economic Meltdown Goes Global

Central banks around the world cut interest rates in unison on Wednesday to limit economic damage from the worst financial crisis in 80 years, giving a temporary boost to battered stock markets.

In an unscheduled announcement made as New York traders were reaching their offices, the US Federal Reserve said it was cutting its key federal funds rate by 50 basis points to 1.5 percent.

China, the European Central Bank and central banks in Britain, Canada, Sweden and Switzerland also cut rates in a coordinated response that investors and world leaders had been demanding.

"The central banks of the world have finally woke up to the gravity of the current situation," said Charles Diebel, the head of interest rates strategy at Nomura. "This is a major step in convincing the world that they are serious about stabilizing."

The coordinated cuts included China for the first time. The Bank of Japan said it saw no need to cut Japanese interest rates but that it strongly supported the coordinated rate cuts.

US stocks fell at the start of trade with the Dow, the Nasdaq and the S&P 500 all down more than 2 percent at the open, but quickly recovered in morning trade. European shares received a temporary bounce.

The central bank action contrasted with more grim macroeconomic news, and some analysts questioned whether the move would work.

The International Monetary Fund issued its bleakest forecast in years, saying the world economy was set for a major downturn with the United States and Europe either in or on the brink of recession.

via The Guardian (UK): World’s central banks cut rates to rescue economy

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