Coordinated Rate Cut From the Major Central Banks

In a coordinated action, the Fed, ECB, Bank of England, Bank of Canada, Swiss National Bank and Sveriges Riksbank (Swedish National Bank) cut the overnight lending rate by 50 basis points in response to the increased money markets strains and uncertainty.

In the joint statement, the central bank's outlook for inflation has diminished with the fall in the energy markets. Furthermore, the downside risk to growth has risen due to high market tensions. The Bank of Japan did not join the coordinated actions of the other central banks, but stated its support for these policy actions.

After the announcement was made public, equity markets rebounded as traders assumed more risk and sold the currencies with low yields. As a consequence the euro gained 120 pips, the pound 130 pips, the aussie is strengthening and the yen rose 150 pips.

The new interest rates are: Fed 1.50%, ECB 3.75%, BoE 4.50%, SNB 2.50%, BoC 2.50%.

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