Global Rate Cut!!!

Holy Cow!!!!

Central banks cut interest rates

• Six central banks - including the Bank of England - have cut their interest rates by half a percentage point.
  
  The UK rate move - which had not been expected until Thursday - puts the interest rate at 4.5% from 5%.
  
  The US Federal Reserve has cut rates from 2% to 1.5% and the European Central Bank (ECB) trimmed its rate from 4.25% to 3.75%.
  
  The unprecedented step is aimed at steadying a faltering global economy and slumping stock markets.
  
  The central banks of Canada and Sweden and Switzerland all took similar action in the co-ordinated move.
  
  China also cut its rate, but by 0.27 percentage points.
  
  European financial markets reacted well, pulling back some of the losses seen earlier on Wednesday.
  
  The last time the Bank of England cut rates in a special meeting was on 18 September 2001 - when rates came down from 5% to 4.75%.
  
  'Bold and decisive'
  
  The announcement came hours after the UK government unveiled plans for a £50bn rescue plan for UK banks.
  
  In the UK, some mortgage lenders immediately passed on the rate cut to borrowers - trimming their variable rates.
  
  Responding to the interest rate cut, UK manufacturers' group the EEF welcomed the " bold and decisive move" it hoped would "arrest the current crisis and collapse in confidence".
  
  "Coupled with the plan to shore up the financial system today's co-ordinated moves should help arrest the potential slide into depression," said the EEF's chief economist Steve Radley.
  
  And analyst Peter Warburton of Economic Perspectives said the rate cut was "fully justified by the depth of the economic crisis that the UK is now facing".
  
  "It has taken far too long for the government and the Bank of England to recognise the scale of threat posed by the seizing up of the credit system," he said.
  
  'Strong support'
  
  The Federal Reserve said that it had acted "in light of evidence pointing to a weakening of economic activity and a reduction in inflationary pressures".
  
  And the ECB said it had felt able to act because "inflationary pressures have started to moderate in a number of countries, partly reflecting a marked decline in energy and other commodity prices".
  
  Although it did not cut its own rate - which is just 0.5% - the Bank of Japan expressed its "strong support" of the policy.

And many thanks to this global plunge protection effort.. the markets turned for the better.. for now!

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Some comments: From CNBC's Bob Pisani

• After closing at 1029, S&P Futures traded as low as 962 until the early morning, then rallied to as high as 1043 when the coordinated rate cut of half a point was announced, then moved all the way back down.
  
  Simply put, the S&P futures moved 8 percent in 4 hours. The hope is that burgeoning coffers, and a rare coordinated rate cut will finally get banks lending again.
  
  While most traders welcomed the cut, there were many who complained about the TIMING. This camp has been waiting--and waiting--for a huge down open on big volume. Never mind that the S&P 500 has dropped 100 points in the past three days--this apparently was not alarming enough for this crowd.
  
  Today, they thought, was the day it would have happened. If the Fed ONLY WOULD HAVE WAITED UNTIL NOON--after the market opened down big--we could have had a Clean Uncontested Reversal.
  
  The Fed, to this crowd, has thwarted this, so now we have Yet Another Muddled Short-Term Bottom. They are still waiting for the Big Washout.

Source: http://www.cnbc.com/id/27082904

Some comments from Kathy

• We have been literally begging the Federal Reserve, the European Central Bank and the Bank of England to work together to stem the bleed in equities and they have finally done it (What is the Fed Waiting For? And Panic Selling in FX Begs Coordinated Easing). For the first time since Sept 2001, central banks around the world have delivered a coordinated interest rate cut. Coming 2 days before the G7 meeting and 1 day before the ECB interest rate decision, their move sends a strong message to market that the central banks are holding nothing back in their attempt to unlock the credit markets, stabilize the stock market and stimulate growth.
  
  Given that the Bank of Japan stood aside, the move is bearish for USD/JPY. However the impact on the Euro and British pound is limited because the interest rate differentials between those currencies and the US dollar remain unchanged. Unprecedented is the buzz word in the financial markets these days and today’s rate cuts were nothing short of that.
  
  Unfortunately despite an initial rally in stocks, equities have given back all of their gains as investors believe that the actions by the central banks are too little too late. This is undoubtedly the right move for the central banks, but the right time to have made the rate cuts was last Friday after the TARP approval. Stocks continue to sell off because this has not solved the funding issue. The LIBOR - OIS (Overnight Index Swap) rate hit a record high indicating that credit is still tight. The Reserve Bank of Australia’s full percentage point rate cut earlier this week has raised the bar.
  
  Source: http://www.kathylien.com/site/japanese-yen/coordinated-interest-rate-cuts-too-little-too-late#more-1294