Emergency Global Rate Cuts: 50 bps
Coordinated rate cuts around the world, 50 basis from the Federal Reserve, European Central Bank and four other central banks.
The banks lowered interest rates in an unprecedented, emergency coordinated bid to "ease the economic effects of the financial crisis."
The Fed cut its benchmark rate by a half point to 1.5%, as the ECB and central banks of the U.K., Canada, Sweden and Switzerland are also reducing rates.
Here is the Fed statement:
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.
Inflationary pressures have started to moderate in a number of countries, partly reflecting a marked decline in energy and other commodity prices. Inflation expectations are diminishing and remain anchored to price stability. The recent intensification of the financial crisis has augmented the downside risks to growth and thus has diminished further the upside risks to price stability.
Some easing of global monetary conditions is therefore warranted. Accordingly, the Bank of Canada, the Bank of England, the European Central Bank, the Federal Reserve, Sveriges Riksbank, and the Swiss National Bank are today announcing reductions in policy interest rates. The Bank of Japan expresses its strong support of these policy actions.
Federal Reserve Actions
The Federal Open Market Committee has decided to lower its target for the federal funds rate 50 basis points to 1-1/2 percent. The Committee took this action in light of evidence pointing to a weakening of economic activity and a reduction in inflationary pressures.
Incoming economic data suggest that the pace of economic activity has slowed markedly in recent months. Moreover, the intensification of financial market turmoil is likely to exert additional restraint on spending, partly by further reducing the ability of households and businesses to obtain credit. Inflation has been high, but the Committee believes that the decline in energy and other commodity prices and the weaker prospects for economic activity have reduced the upside risks to inflation.
The Committee will monitor economic and financial developments carefully and will act as needed to promote sustainable economic growth and price stability.
Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; Timothy F. Geithner, Vice Chairman; Elizabeth A. Duke; Richard W. Fisher; Donald L. Kohn; Randall S. Kroszner; Sandra Pianalto; Charles I. Plosser; Gary H. Stern; and Kevin M. Warsh.
In a related action, the Board of Governors unanimously approved a 50-basis-point decrease in the discount rate to 1-3/4 percent. In taking this action, the Board approved the request submitted by the Board of Directors of the Federal Reserve Bank of Boston.
Source:
Joint Statement by Central Banks
Federal Reserve, October 8, 2008 7:00 a.m. EDT
http://www.federalreserve.gov/newsevents/press/monetary/20081008a.htm
Wednesday, October 08, 2008 | 07:09 AM | Permalink
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Comments
Hopefully this will give the system the jolt it badly needs in the other direction.
Options almost always expire worthless, especially puts.
Did everyone really think the gov'ts were just going to stand by and watch total finanacial destruction?
Posted by: John Borchers | Oct 8, 2008 7:12:13 AM
Okay this is a WTF moment. They are just delaying the inevitable. Heck, even the futures retreated after having almost 300 point swing. This is just insane!
Posted by: Oskar | Oct 8, 2008 7:13:39 AM
Cheers! Great News! Great Move! Right Direction! DJIA will go up 2000 to 3000 points today! YEAH YEAH YEAH!!!
Posted by: MM | Oct 8, 2008 7:14:00 AM
I simply cannot listen to Michelle Caruso Cabrera. She is so wrong about so much.
What are her qualifications?
Man, she is clueless.
Posted by: wendy | Oct 8, 2008 7:17:03 AM
Good intentions, wishful thinking ...... More of the same old XXXX ( SOS ) .
Posted by: Bill | Oct 8, 2008 7:19:35 AM
these cuts better work, the only thing left
is just printing money and handing it out
to governments to spend.
Posted by: rickrude | Oct 8, 2008 7:21:52 AM
I have a feeling that Ben behaves like a trader. He loves to time the market!
Posted by: MM | Oct 8, 2008 7:22:07 AM
I simply cannot listen to Michelle Caruso Cabrera. She is so wrong about so much.
What are her qualifications?
Man, she is clueless.
Posted by: wendy | Oct 8, 2008 7:17:03 AM
///////////////////////////////
she has a hot body, so who cares, atleast pleasant to look at.
much better than Kudlow(who is supposed to
be educated)
Posted by: rickrude | Oct 8, 2008 7:23:44 AM
Trailing stop hit. Why doesn't the Fed do something genuinely purposeful? Otherwise they're just mucking up otherwise rational trades.
On the other hand, I guess the hoi polloi are over due for a warm-and-fuzzy day. Let them eat cake, I say.
Posted by: andrewunknown | Oct 8, 2008 7:23:53 AM
We've seen this movie before. The Fed's medicine hasn;t worked. Why do we think it will work this time around? Just another dead cat bounce IMO.
Posted by: Dhukka | Oct 8, 2008 7:28:09 AM
This should effect the markets in a bigger way than expected.
They are basically going to flush money out of bonds by having a low interest rate back into the market, where it needs to be.
Posted by: John Borchers | Oct 8, 2008 7:31:47 AM
"Give Ben a Credit?"
Give me a break! Mr Steve Liesman
Posted by: Ben | Oct 8, 2008 7:33:35 AM
I dont know if they have any more cards left to play. Though can't fault them for not trying.
Maybe just my bearish nature, but I am having this feeling that the worse things imaginable just might happen.
Posted by: pj | Oct 8, 2008 7:36:34 AM
$5 says the markets close down from yesterday.
Posted by: Mark W | Oct 8, 2008 7:39:07 AM
whats a joe6pack to do for old age?
I know this an emergency but low rates got us here imo
j6p playing the market for his nest egg ... bring back sustainable interest on savings (guarantee it FDIC) and restore the market for the pros
Posted by: Greg0658 | Oct 8, 2008 7:46:49 AM
They should just merge all those Central banks, cut overhead. Get those PhDs out there on the talking head's shows and out of the Central bank basement(s).
Posted by: VennData | Oct 8, 2008 7:49:24 AM
I'm a pretty pessimistic guy by anyone's standard, but even I say this screaming downfall has gone too far! It's becoming more apparent that it isn't the credit market that is causing the price falls, so what do you think it is? Redemptions? I even saw an article yesterday on "Comedy, Not Business, Channel" (cnbc) that portrayed the traders as victims that are having a hard time. Besides wanting to puke after reading it, it got me thinking about how there is nothing on the demand side of stocks. Nothing! So how is a rate cut suppose to help that?
Posted by: Rob P | Oct 8, 2008 7:50:31 AM
To quote my favorite "Fast Money" trader, Jeff Macke: "They can make the markets jump, but they can't make them fly." The market still needs to find it's own natural bottom, with THE bottom of this bear market still likely far away. I think this move is to try to ensure that the bottom is not an overshoot past "fundamental" levels. So I'm thinking a bottom of the Dow about 6000-8000 rather than 5000-6000... In the end, low prices are the best solution to a buyer's strike.
HCF
Posted by: HCF | Oct 8, 2008 7:52:05 AM
Like trying to cure a quickly spreading cancer with a band-aid.
If markets close down today this will be an extremely bad omen moving forward.
Posted by: Neil S | Oct 8, 2008 7:52:17 AM
Well, if I am a pussy Fed chairman, and I see a Presidential candidate with a significant lead 4 weeks from an election being advised by the last Fed Chairman who had balls, then off course I am going to push for lower rates to put some lipstick on that Dow Jones Industial Pig.
Hair Weave Kernen (not confirmed) just made fun of Trichet again.
Posted by: CNBC Sucks | Oct 8, 2008 7:55:39 AM
JB - "going to flush money out of bonds by having a low interest rate back into the market"
inject corporations (flush with cash) with even more (to throw to the wind) ... yea thats an answer ... CEO CFO salary caps 1st please
Posted by: Greg0658 | Oct 8, 2008 7:57:22 AM
My $5 bet is that we close green today, then overnight tonight the SEC lifts the short ban in financials but reinstates the uptick rule. Thursday the S&P closes lower than the 996 from yesterday. Friday we get a follow through selloff to the lowest intraday level we've seen to date and an impressive reversal. Not entirely a guess, but I haven't got alot of confidence in that prediction.
Posted by: bdphil | Oct 8, 2008 7:57:42 AM
Too funny. People keep on clinging to what has worked for 20 years... rate cuts! The rate cutting game to kickstart the economy is finished folks.
With default rates increasing by hundreds of basis points, I don't think banks will be passing on the rate cut. The 50 bps is a drop in the ocean.
With the world nationalizing everything in sight, inflation will require HIGHER RATES!!!
Posted by: D. | Oct 8, 2008 7:57:56 AM
The co-ordinated rate cut should give investors the confidence they need to buy equities.
At the very least, it should end the bleeding.
People should not expect this carnage to continue indefinitely no matter how pessimistic they are.
I don't think this bear has run its course, but I do think we have seen the end of this downleg.
Posted by: blin | Oct 8, 2008 7:58:19 AM
"Inflationary pressures have started to moderate in a number of countries, partly reflecting a marked decline in energy and other commodity prices. "
Surprise! Energy and food inflation matter when they're declining, but not on the way up.
Posted by: Denis | Oct 8, 2008 8:08:13 AM
