Wed, Oct 8 2008, 11:58 GMT
by Marina Schiaffino
Stock markets worldwide closed yesterday with important losses, despite the coordinate cut, while the IMF warned about a the spreading financial crisis turning into a deeper than expected recession. It also praised interest rate cuts, as it has warned about the worsening of the global economic outlook, which threatens to push several advanced economies into recession.
Markets were astonished yesterday when the US federal Reserve, European Central Bank, Bank of England, Bank of Canada, Swiss National Bank and the Swedish Central Bank announced a surprise a coordinated rate cut in order to support economies after the growing financial crisis.
The driving of this movement was the Fed’s Monetary Policy Committee that voted unanimously to cut its target Rate by 50 basis points to 1.5%. The Decision was followed by the rest of the Central Banks
The Bank of Japan expressed its strong support to those policy actions, according to the fed’s statement, although they won't cut rates for the moment.
During the Asian session three more banks have followed this measure: The Bank of Korea and Taiwan’s Central Bank of China cut their interest rates by 25bp, leaving the benchmark rate at 5% and 3.25%. The Hong Kong Monetary Authority lowered it 50bp, from 2.5% to 2%.
The Fed justified the decision on an attempt to support households and businesses: "Incoming economic data suggest that the pace of economic activity has slowed markedly in recent months. Moreover, the intensification of financial market turmoil is likely to exert additional restraint on spending, partly by further reducing the ability of households and businesses to obtain credit."
Tatsuya Kawanishi, junior advisor at FXstreet.com thinks that "Wall Street's answer to the coordinate rate cuts was no confidence towards banks. Instability on stock and currency markets still remains. The Western stock markets keep sliding after the 10 banks coordinated cuts, while gold becomes a safe haven, hitting the monthly high at 910.64." About the currencies market, he states that "the USD/JPY went down 98.87 support yesterday. The BoJ might consider to cut its benchmark rates if the JPY gets more appreciated." The future looks quite uncertain, because "financial institutions have made net worth inadequate. The Fed might need to take some further steps such as buying more commercial papers or injecting public funds into financial institutions in order to diminish global markets' instability."
| Central Bank | Next Meeting | Current Interest Rate | Previous Interest Rate |
| Federal Reserve | Oct 29 2008 | 1.5% | 2.0% |
| European Central Bank | Nov 06 2008 | 3.75% | 4.25% |
| Bank of England | Nov 11 2008 | 4.5% | 5.0% |
| Bank of Canada | Oct 21 2008 | 2.5% | 3.0% |
| Swiss National Bank | Dec 11 2008 | 2.25% | 2.75% |
| PBoC | - | 6.93% | 7.20% |
| Sveriges Riksbank | - | 4.25% | 4.75% |
| Bank of Korea | - | 5% | 5.25% |
| Hong Kong Monetary Authority | - | 2% | 2.5% |
| Taiwan’s Central Bank of China | - | 3.25% | 3.5% |
Published on Thu, Oct 9 2008, 14:25 GMT
FXstreet.com
| Portaferrissa 7, 1r 2a, Barcelona 08002, Catalonia - Spain
http://www.fxstreet.com | forex@fxstreet.com
FX View - Headline unemployment rate creates dollar shocker by Interactive Brokers LLC
Fri, Nov 6 2009, 18:41 GMT
Forex Daily Overview - USD mixed, unemployment rises to 10.2% by Easy Forex
Fri, Nov 6 2009, 18:31 GMT
Weekly Market Commentary - Fed, BOE and ECB kept rates on hold by Mizuho Corporate Bank
Fri, Nov 6 2009, 15:45 GMT
Forex Daily Analysis - USDJPY is moving towards support level at 89.55 by Investija.com
Fri, Nov 6 2009, 14:35 GMT
Forex Technical Report - U.S. Markets Brace for Jobs Data by ForexHound.com
Fri, Nov 6 2009, 13:29 GMT
fed, eurusd, boe, ecb, centralbanks, riksbank, pboc, snb, highlighted
View AllForex: EUR/USD: Euro post weekly gains
FXstreet.com | Fri, Nov 6 2009, 22:49 GMT
CURRENCIES: Dollar Dips Vs. Yen As Jobs Data Have Fed On Hold
Dow Jones | Fri, Nov 6 2009, 22:14 GMT
Mexico Stocks Close Higher As Peso Weakens; IPC Rises 0.5%
Dow Jones | Fri, Nov 6 2009, 21:42 GMT
U.S. markets ended with small gains, up for the week; Dollar mixed
FXstreet.com | Fri, Nov 6 2009, 21:32 GMT
Canada Afternoon: C$ Ends Lower, Underperforms On Weak Jobs Data
Dow Jones | Fri, Nov 6 2009, 20:40 GMT
fed, eurusd, boe, ecb, centralbanks, riksbank, pboc, snb, highlighted
View AllGET CASH BACK FOR YOUR TRADES! Learn more about the Pip Rebate Program