Today central banks of the world announced rate cuts in a move to offset the global liquidity crunch. Of note: The ECB cut by 75 bps to 2.25%, Bank of England cut by 100 bps to 2%; Australia by 100 bps to 4.25%; New Zealand by 150 bps to 5%, and Sweden by 175 bps to 2%. The coordinated move speaks to the widespread nature of the financial meltdown that began with the collapse of the subprime mortgage market and has extended to credit markets domestic and foreign. Today is a stepping stone that will likely conclude in a worldwide zero-interest-rate policy (ZIRP).
A half-point cut from the Fed to 0.5% is anticipated in their next meeting.