Seven Central banks cut interest rates

by Amitjha | October 8, 2008 at 03:27 am

458 views | 12 Recommendations | 4 comments

Central banks from seven countries have cut the intrest rate in an combined effort to keep the money flow in the market. It seems countries across the world cooperating each other to save the world from financial crisis.

Seven 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, China, 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".

The trick with rescuing a market is making sure that people on the street believe that it's been rescued. One way of doing this is by passing on some of the savings to them directly:

A third of borrowers - approximately 4 million people - with home loans that track the Bank's base rate will benefit immediately. Those with a £150,000 mortgage will see their interest-only repayments fall by £63 a month.

Halifax, Lloyds TSB and Barclays have also announced that they will pass on the full rate cut to homeowners who are on their standard variable rates. The move by Halifax will come into force on November 1 and will leave its SVR at 6.5%.

Borrowers with other lenders will have to wait to find out whether they will benefit. About 5 per cent of borrowers are on a standard variable rate while another 7 per cent are on mortgages which are based on the standard variable rate.

Of course, that 63 quid ($126) is nothing compared to the avalanche of tax money that is pouring from government coffers to private banks, but they're making it up as they go along, in order to compensate for bankers who have been... making it up as they go along.

John Cridland, CBI Deputy Director-General, said: "This was an essential and timely rate cut which the CBI had called for to help restore business and consumer confidence.

"We have now seen major steps by both the Government and the Bank of England to support the economy and the financial system. These will be welcomed by business, and will help the economy at a critical time."

The trade body said the coordinated rate cuts will benefit the global economy and stabilise financial markets.

Stephen Robertson, director general of the British Retail Consortium, said: "This bold action by the Bank of England is the right decision and will be welcomed by hard-pressed customers and retailers."

Ultimately, though, any measure that does not bring rogue lenders to heel will fail in the long run. History proves this for anyone who cares to look: was the S&L scandal really that long ago?

recommend This comment thread is now closed

anamika.mis15

flagged this story as Good Stuff

at 04:00 on October 8th, 2008

Amitjha, I like this story. It's good stuff.

Jordan Yerman

at 05:14 on October 8th, 2008

Karen Hatter

at 05:18 on October 8th, 2008

Great observations and information, Jordan.

Pasi

at 08:45 on October 8th, 2008

I wonder, if people are now less willing to save their money at bank account, when the profit falls. Will this mean more trouble for banks after all? Why to spank those, who have saved money and reward those, who have wasted it.

Tax payers money is always wanted, and now they want more and more.

NowPublic

Tech & Biz

Photos