Central banks make move to ease financial crisis

Early last week six of the world’s central banks decided to cut the base rate by 0.5% in a move to try and ease the global financial crisis that seems to be deepening, and to try and ease the economy. The decision to cut rates by 0.5% was taken by the Bank of England, the US Federal Reserve, the European Central Bank and central banks in Sweden, Switzerland, and Canada.

The Prime Minister, Gordon Brown, announced the rate cut twenty four hours ahead of the scheduled Monetary Policy Committee meeting, where interest rate movement is normally determined. The rate cut takes the UK base rate from 5% to 4.5%, the US Federal Reserve base rate from 2% to 1.5%, and the ECB base rate from 4.25% to 3.75%.

Following the announcement the EEF’s chief economist Steve Radley said: “Coupled with the plan to shore up the financial system today’s co-ordinated moves should help arrest the potential slide into depression.” He described the move as ‘bold and decisive’ and said that he hoped it would “arrest the current crisis and collapse in confidence”.

Another industry official said that the rate cut would “provide at least a temporary boost to confidence”. However, he added: “We fear that there is still a lot more work to do. The fact that the central banks have had to take such extreme measures underlines how bad market conditions have become.”