chart courtesy of BBC``Six central banks - including the Bank of England - have cut their interest rates by 50 basis points.
``The UK rate move - which had not been expected until Thursday - puts interest rates at 4.5% from 5%.
``The US Federal Reserve has cut rates from 2% to 1.5% and the European Central Bank trimmed its rate from 4.25% to 3.75%.
``The central banks of Canada, Sweden and Switzerland all took similar action in the co-ordinated move.
``The unprecedented step is aimed at steadying a faltering global economy and slumping stock markets.
``The Fed said that it had acted "in light of evidence pointing to a weakening of economic activity and a reduction in inflationary pressures".
Separately, China lowered its key rate by .27%. Japan didn't participate but supported the move. (Bloomberg)
Earlier today Hong Kong took the lead when it announced interest rates cuts....
``The base rate for banks will drop to 2.5 percent from 3.5 percent tomorrow, based on the U.S. benchmark target rate plus 50 basis points, down from 150 basis points, Chief Executive Joseph Yam said today. The HKMA tracks the Fed Funds rate, which is now at 2 percent, because Hong Kong's currency is pegged to the dollar.(Bloomberg)
Australia likewise took a surprising 1% cut yesterday.
So central banks are using unparalleled modern ways to deal with the unprecedented scale of deflation by using a combination of various tools, aside from tight collaboration and synchronized efforts among themselves. This seems like their version of "globalization" of central bank policies. Although we really doubt if they can be successful in trying to contain the market process of unwinding the excesses of the past. Maybe they can buy some time.
Nevertheless, since rate cuts are effectively growth stimulus, the impact should be different in national boundaries depending on their capital and production structure.
As an aside, central banks today look increasingly desperate and captive to the political demands of Wall Street.
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