BoE and ECB slash interest rates by half a point

08 October 2008 13:55  [Source: ICIS news]

By Mark Watts

 

LONDON (ICIS news)--The Bank of England and European Central Bank (ECB) on Tuesday cut interest rates by half a percentage point in an attempt to curb the escalating global financial crisis.

 

Central banks in the US, China, Canada, Sweden and Switzerland also cut rates as markets in Asia and Europe continued to plummet amid fears of a global recession.

 

The UK move, which was not expected until Thursday, brought the interest rate down to 4.5% from 5% in an attempt to revive investor confidence and falling stocks.

 

The announcement came hours after the UK government announced plans for a £50bn ($87bn, €64bn) rescue plan for the ailing British banking sector.

 

“Throughout the current financial crisis, central banks have engaged in continuous close consultation and have cooperated in unprecedented joint actions such as the provision of liquidity to reduce strains in financial markets,” the Bank of England said in a statement.

 

The ECB decreased its rate for the euro area to 3.75% from 4.25% in its first rate cut since June 2003. It said it was able to justify the cut as inflationary pressures had started to moderate along with a decline in energy and other commodity prices.

 

European chemicals stocks have been volatile throughout the day, failing to bounce back from the huge hit taken as markets crashed on Monday.

 

The US Federal Reserve lowered its key federal funds interest rate by 50 basis points to 1.5%, announcing the cut early before markets opened.

 

($1 = €0.73)

By: Mark Watts
+44 20 8652 3214

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