ECB, US Fed & Bank of England cut rates

corkfella

from rte.ie

Wednesday, 8 October 2008 12:17
The European Central Bank, US Federal Reserve and Bank of England have all cut their key interest rates by half a percentage point.

The ECB interest rate now stands at 3.65%, the Bank of England rate is 4.5% while the US Federal Reserve's key rate is down to 1.5%

The US Federal reserve said it cut the rate 'in light of evidence pointing to a weakening of economic activity and a reduction in inflationary pressures.'



big suprise from the ecb considering they all agreed only last thursday and left it alone, it must show how worried they are but at least they are all working together.

Jackz

ISEQ today - 3300 (morning) -> 3075 -> 3312 (after this announcement) -> 3222

(all approx)

20goto10

corkfella wrote: »

at least they are all working together.

Its the New World Order. Oops sorry thought this was the conspiracy forum

mike65

About time, inflation is rarely a problem when the arse is falling out of the economy.

Mike

corkfella

ya I'd say trichet was under some pressure to implement this, they were being a bit bloody stubborn about it, especially when oil, food, shares and commodities are tanking

silverharp

dont expect it to make a huge difference, people wont borrow and lend unless they perceive that future asset prices will increase and we are a long way from a bottom.

mike65

mike65 wrote: »

About time, inflation is rarely a problem when the arse is falling out of the economy.

Mike

Not quite.

The euro is vulnerable to a variety of exogenous factors such as oil and food prices which can lead to inflation even during times of recession.

This was the major theme of the EUROFRAME conference and was a big worry by the commentators there. However, events have moved on since then, but the point does remain.

I think myself and nesf mentioned this before here a while back.

gabigeist

Jackz wrote: »

ISEQ today - 3300 (morning) -> 3075 -> 3312 (after this announcement) -> 3222

(all approx)

-> 3,054 (close)

ninebeanrows

ECB, US Fed & Bank of England cut rates

Have no effect on Global Markets.

ISEQ down 8%
FTESE down 5.2%

Cac and Dax down 6 and 5%.

The tumble continues.

Meanwhile the DOW is currently down 200pts @ 9220

Seems like days ago it was fighting 11000, looks like it cud slip into the unkown
terrirtory of 8000.

Amazing.

nesf

Weathercheck wrote: »

Amazing.

Not really, it was widely expected that there'd be a rate cut and it would have already been priced into the markets. You get reactions when the central banks do something unexpected.

SoCal90046

nesf wrote: »

Not really, it was widely expected that there'd be a rate cut and it would have already been priced into the markets. You get reactions when the central banks do something unexpected.

Agreed. And I am certainly not surprised that the action was concerted. I predict that we're going to see more concerted actions by the central banks in the future.

TheBazman

Unfortunately the rate at which banks borrow from each other at (Libor) is likely to set marginally higher today despite the cuts yesterday. This means that if/when banks pass on the cut to variable/tracker mortgage holders they will have compressed their margin by another 50bps. More trouble for banks.

I think most people would assume that if banks didnt pass on this cut then they are screwing mortgage holders, you can argue they are or they arent, but I heard a contributer on the Last Word saying that banks were making millions each day they delayed passing on the cut. This is incorrect as it assumes that the cost of funding for banks is also 50bps lower - it isnt!

SoCal90046

The Wall Street Journal forecasting survey of economists reveals a sentiment that the US economy is in recession and expects the contraction to last three quarters. Here's the e-mail alert I received.

The U.S. economy has sunk into a recession and government action is critical to stem the damage, according to economists in the latest Wall Street Journal forecasting survey. On average, the 52 economists surveyed now expect gross domestic product to contract in the third and fourth quarters of this year, as well as the first quarter of 2009. If those predictions bear out, it would mark the first time U.S. GDP -- the total value of goods and services produced -- has contracted for three consecutive quarters in more than a half century.

And, for those interested, a link to the actual story. I wonder when NBER will make the call.

SoCal90046

Given what's happened again today on US exchanges, I think that Paulson and his counterparts in Japan and the EU should call on the governing bodies of exchanges and markets to take a two day time out--close down for two business days. I think it necessary because what I see isn't an orderly effort to determine price, I see an enabling mechanism for irrational behavior. And just like any form of "terrorism," it takes very few participants to set the tone for everyone else!

At the heart of the current problem is money, specifically, the problems in the credit markets that first surfaced on September 17. On that most scary of nights, things started to look like they were coming to a grinding halt. I am in favor of transparency; transparency in pricing is critical, but what's happening today, in fact for the past few days, just makes no sense.

So, as long as we're in unchartered territory and I can't really figure out what's happening or why, I don't want to play. We're definitely in an era when we'll be able to buy companies at extraordinary low prices; I am looking forward to doing that. However, I have also watched what Warren Buffett has done recently and he has constructed "investments" such that the only way he can lose is if the company goes belly up. Look at the Goldman Sachs deal, for example, with a 10% guaranteed dividend. The signal to me: he doesn't know where the bottom is and is not going to invest unless he gets protection. I don't have that kind of clout, so I am sitting on the sidelines until the insanity stops.

silverharp

SoCal90046 wrote: »

Given what's happened again today on US exchanges, I think that Paulson and his counterparts in Japan and the EU should call on the governing bodies of exchanges and markets to take a two day time out--close down for two business days. I think it necessary because what I see isn't an orderly effort to determine price, I see an enabling mechanism for irrational behavior. And just like any form of "terrorism," it takes very few participants to set the tone for everyone else!

At the heart of the current problem is money, specifically, the problems in the credit markets that first surfaced on September 17. On that most scary of nights, things started to look like they were coming to a grinding halt. I am in favor of transparency; transparency in pricing is critical, but what's happening today, in fact for the past few days, just makes no sense.

So, as long as we're in unchartered territory and I can't really figure out what's happening or why, I don't want to play. We're definitely in an era when we'll be able to buy companies at extraordinary low prices; I am looking forward to doing that. However, I have also watched what Warren Buffett has done recently and he has constructed "investments" such that the only way he can lose is if the company goes belly up. Look at the Goldman Sachs deal, for example, with a 10% guaranteed dividend. The signal to me: he doesn't know where the bottom is and is not going to invest unless he gets protection. I don't have that kind of clout, so I am sitting on the sidelines until the insanity stops.

I'm not sure I'd agree with closing the markets, if you look at longer term charts of S&P and Dow , these corrections have happened before, I am following a model of 1937 and 1973, based on some technical markers common between now and then, we WILL get a low during this month and then a 40/50% retracement of the summer high and then another leg down in the new year, worst case down side target is 50% from the 07 highs

Ultimately markets find the level they need to find so trying to "manage" this doesnt make any difference. When we had the Jan low some technicians that I was in contact with thought at the time that the low was forced so here we are again with Mr market telling us where it want to go.

SoCal90046

silverharp wrote: »

I'm not sure I'd agree with closing the markets, if you look at longer term charts of S&P and Dow , these corrections have happened before, I am following a model of 1937 and 1973, based on some technical markers common between now and then, we WILL get a low during this month and then a 40/50% retracement of the summer high and then another leg down in the new year, worst case down side target is 50% from the 07 highs

Ultimately markets find the level they need to find so trying to "manage" this doesnt make any difference. When we had the Jan low some technicians that I was in contact with thought at the time that the low was forced so here we are again with Mr market telling us where it want to go.

I am not really referring to whether or not the markets will reach a low; they will. I have no problems with markets sinking--in fact, I am in favor of it as long as I am a long way off from retirement. I think that right now the market is enabling a panic behavior rather than facilitating price discovery.