Wednesday, October 8, 2008

Multinational Rate Cut

The central banks of the U.S. and Europe today dropped overnight lending rates by 50 basis points. For the Fed, that is now 1.5%—the first change since April, where it had been steady at 2%. ECB's new rate is 3.75%, Canada 2.5%, UK 4.5%, and Sweden 4.25%. China lowered its rate by .27%, and Japan, who has already been through the credit unwind, kept rates the same.

Given current deflationary pressures, this step is not surprising. Now whether it will help, or if these liquidity measures are just kicking a horse already dead from credit exhaustion, remains to be seen.

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