Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
Gold Price Setting Up Just Like Before COVID-19 Breakdown – Get Ready! - 27th Sep 20
UK Coronavirus 2nd Wave SuperMarkets Panic Buying 2.0 Toilet Paper , Hand Sanitisers, Wipes... - 27th Sep 20
Gold, Dollar and Rates: A Correlated Story - 27th Sep 20
WARNING RTX 3080 AIB FLAWED Card's, Cheap Capacitor Arrays Prone to Failing Under Load! - 27th Sep 20
Boris Johnson Hits Coronavirus Panic Button Again, UK Accelerting Covid-19 Second Wave - 25th Sep 20
Precious Metals Trading Range Doing It’s Job to Confound Bulls and Bears Alike - 25th Sep 20
Gold and Silver Are Still Locked and Loaded… Don't be Out of Ammo - 25th Sep 20
Throwing the golden baby out with the covid bath water - Gold Wins - 25th Sep 20
A Look at the Perilous Psychology of Financial Market Bubbles - 25th Sep 20
Corona Strikes Back In Europe. Will It Boost Gold? - 25th Sep 20
How to Boost the Value of Your Home - 25th Sep 20
Key Time For Stock Markets: Bears Step Up or V-Shaped Bounce - 24th Sep 20
Five ways to recover the day after a good workout - 24th Sep 20
Global Stock Markets Break Hard To The Downside – Watch Support Levels - 23rd Sep 20
Beware of These Faulty “Inflation Protected” Investments - 23rd Sep 20
What’s Behind Dollar USDX Breakout? - 23rd Sep 20
Still More Room To Stock Market Downside In The Coming Weeks - 23rd Sep 20
Platinum And Palladium Set To Surge As Gold Breaks Higher - 23rd Sep 20
Key Gold Ratios to Other Markets - 23rd Sep 20
Watch Before Upgrading / Buying RTX 3000, RDNA2 - CPU vs GPU Bottlenecks - 23rd Sep 20
Online Elliott Wave Markets Trading Course Worth $129 for FREE! - 22nd Sep 20
Gold Price Overboughtness Risk - 22nd Sep 20
Central Banking Cartel Promises ZIRP Until at Least 2023 - 22nd Sep 20
Stock Market Correction Approaching Initial Objective - 22nd Sep 20
Silver Bulls Will Be Handsomely Rewarded - 21st Sep 20
Fed Will Not Hike Rates For Years. Gold Should Like It - 21st Sep 20
US Financial Market Forecasts and Elliott Wave Analysis Resources - 21st Sep 20
How to Avoid Currency Exchange Risk during COVID - 21st Sep 20
Crude Oil – A Slight Move Higher Has Not Reversed The Bearish Trend - 20th Sep 20
Do This Instead Of Trying To Find The “Next Amazon” - 20th Sep 20
5 Significant Benefits of the MT4 Trading Platform for Forex Traders - 20th Sep 20
A Warning of Economic Collapse - 20th Sep 20
The Connection Between Stocks and the Economy is not What Most Investors Think - 19th Sep 20
A Virus So Deadly, The Government Has to Test You to See If You Have It - 19th Sep 20
Will Lagarde and Mnuchin Push Gold Higher? - 19th Sep 20
RTX 3080 Mania, Ebay Scalpers Crazy Prices £62,000 Trollers Insane Bids for a £649 GPU! - 19th Sep 20
A Greater Economic Depression For The 21st Century - 19th Sep 20
The United Floor in Stocks - 19th Sep 20
Mobile Gaming Market Trends And The Expected Future Developments - 19th Sep 20
The S&P 500 appears ready to correct, and that is a good thing - 18th Sep 20
It’s Go Time for Gold Price! Next Stop $2,250 - 18th Sep 20
Forget AMD RDNA2 and Buy Nvidia RTX 3080 FE GPU's NOW Before Price - 18th Sep 20
Best Back to School / University Black Face Masks Quick and Easy from Amazon - 18th Sep 20
3 Types of Loans to Buy an Existing Business - 18th Sep 20
How to tell Budgie Gender, Male or Female Sex for Young and Mature Parakeets - 18th Sep 20
Fasten Your Seatbelts Stock Market Make Or Break – Big Trends Ahead - 17th Sep 20
Peak Financialism And Post-Capitalist Economics - 17th Sep 20
Challenges of Working from Home - 17th Sep 20
Sheffield Heading for Coronavirus Lockdown as Covid Deaths Pass 432 - 17th Sep 20
What Does this Valuable Gold Miners Indicator Say Now? - 16th Sep 20
President Trump and Crimes Against Humanity - 16th Sep 20
Slow Economic Recovery from CoronaVirus Unlikely to Impede Strong Demand for Metals - 16th Sep 20
Why the Knives Are Out for Trump’s Fed Critic Judy Shelton - 16th Sep 20
Operation Moonshot: Get Ready for Millions of New COVAIDS Positives in the UK! - 16th Sep 20
Stock Market Approaching Correction Objective - 15th Sep 20
Look at This Big Reminder of Stock Market Mania - 15th Sep 20
Three Key Principles for Successful Disruption Investors - 15th Sep 20
Billionaire Hedge Fund Manager Warns of 10% Inflation - 15th Sep 20
Gold Price Reaches $2,000 Amid Dollar Depreciation - 15th Sep 20
GLD, IAU Big Gold ETF Buying MIA - 14th Sep 20
Why Bill Gates Is Betting Millions on Synthetic Biology - 14th Sep 20
Stock Market SPY Expectations For The Rest Of September - 14th Sep 20
Gold Price Gann Angle Update - 14th Sep 20
Stock Market Recovery from the Sharp Correction Goes On - 14th Sep 20
Is this the End of Capitalism? - 13th Sep 20
The Silver Big Prize - 13th Sep 20
U.S. Shares Plunged. Is Gold Next? - 13th Sep 20
Why Are 7,500 Oil Barrels Floating on this London Lake? - 13th Sep 20
Sheffield 432 Covid-19 Deaths, Last City Centre Shop Before Next Lockdown - 13th Sep 20
Biden or Trump Will Keep The Money Spigots Open - 13th Sep 20
Gold And Silver Up, Down, Sideways, Up - 13th Sep 20

Market Oracle FREE Newsletter

How to Get Rich Investing in Stocks by Riding the Electron Wave

ECB Biggest Interest Rate Cut in History Heading for ZIRP

Interest-Rates / Euro-Zone Dec 04, 2008 - 01:18 PM GMT

By: Mike_Shedlock


Best Financial Markets Analysis ArticleThe race to Global ZIRP took another big step forward today as central bankers around the globe cut rates. Let's take a look at the recent action .Europe's Central Banks Lower Rates to Fight Recession

The European Central Bank delivered a 75 basis-point reduction in its main refinancing rate, the most in its 10-year history, while the Bank of England cut its benchmark rate to 2 percent, the lowest level since 1951. The Swedish and Danish central banks also lowered their key rates.

“Policy makers are moving toward historically low levels of interest rates and they probably won't stop there,” said Paul Dales, an economist at Capital Economics Ltd. in London. “We are going to see all central banks bring rates down as close to zero as they can get.”

Bank of England Governor Mervyn King discussed the possibility of lowering the U.K. rate to zero for the first time on Nov. 25 and said the biggest challenge he faces is renewing the flow of credit in the economy.

The U.K. interest rate now matches the lowest in the central bank's history. It was last at 2 percent when Winston Churchill's victory in a general election made him prime minister for the second time.

“If this goes wrong we are just going to go sideways for the next decade,” Graeme Leach, chief economist at the Institute of Directors in London, said in a television interview.

ECB's Trichet Says Euro-Region Economy Will Contract

European Central Bank President Jean- Claude Trichet said the euro region's economy will shrink next year for the first time since 1993 after the bank delivered the biggest interest rate cut in its 10-year history.

The ECB lowered its benchmark by three quarters of a percentage point to 2.5 percent. Trichet declined to give clues on further moves, saying only that the ECB shouldn't get “trapped” by cutting rates too low.

As well as cutting rates, the ECB has flooded money markets with cash and widened its collateral rules to unfreeze credit markets. Trichet said today it may be possible for the bank to purchase financial assets outright to reflate the economy, although he declined to say if it would.

New Zealand Cuts Key Interest Rate by Record to 5%

New Zealand's central bank cut its benchmark interest rate by a record 1.5 percentage points to 5 percent and signaled more reductions to come as it attempts to steer the economy out of it worst recession in 18 years.

“Today's decision takes monetary policy to an expansionary position,” Reserve Bank Governor Alan Bollard said in a statement in Wellington today. “Some further but significantly smaller reductions in interest rates may be warranted.”

U.K. Pound Trades Near Record Low Versus Euro as BOE Cuts Rate

The pound traded close to an all-time low against the euro and near the weakest since 2002 versus the dollar as the Bank of England cut its key interest rate to the lowest level since 1951.

“Overall the 100 basis-point cut is going to be seen as disappointing,” said Ian Stannard, a foreign-exchange strategist at BNP Paribas in London. “Although 100 basis points was fully priced in, expectations were rising during the day for an even bigger rate cut.”

The pound fell to $1.4638 by 2:30 p.m. in London, from $1.4784 yesterday. It was at 86.54 pence per euro, from 86.01, after weakening to a record low of 86.96 pence.

Indonesia Unexpectedly Cuts Key Rate to Boost Growth

Indonesia's central bank unexpectedly lowered interest rates for the first time in a year to shield Southeast Asia's biggest economy from the global recession.

Governor Boediono and his seven colleagues reduced the benchmark rate to 9.25 percent from 9.5 percent, Bank Indonesia said in a statement in Jakarta today. Just six of 23 economists surveyed by Bloomberg News had forecast a cut.

Sarkozy Announces EU26 Bln of Measures to Spur Growth

French President Nicolas Sarkozy announced 26 billion euros ($33 billion) of measures to spur growth in an economy teetering on the brink of recession.

The aid, focused on public investment and early tax reimbursement for companies, totals 1.3 percent of gross domestic product and will increase the 2009 budget deficit to 3.9 percent of GDP from a projected 3.1 percent.

“Because the crisis is strong, the response must be strong,” Sarkozy said in a speech in Douai today. “The response to the crisis is a massive investment effort.”

Australia's Economy Grows 0.1%, Weakest in 8 Years

Australia's economy grew last quarter at the weakest pace in eight years as household spending stalled, increasing pressure on the central bank to add to the biggest round of interest-rate cuts since a recession in 1991.

The threat of Australia's first recession in 17 years has prompted central bank Governor Glenn Stevens to slash borrowing costs by three percentage points since early September. Consumers and businesses are reeling from a 44 percent slump in the benchmark Australian S&P/ASX 200 stock index and the biggest decline in home prices since 1978.

“A recession shouldn't be discounted by policy makers or the general public,” said Joshua Williamson, a senior strategist at TD Securities Ltd. in Sydney. “The outlook is more negative than positive.”

Australia Has More Scope for Rate Cuts, Former RBA Chief Says

Australia has room to lower interest rates further and increase government spending to support the economy amid the current global crisis, former central bank Governor Ian Macfarlane said.

Reserve Bank of Australia Governor Glenn Stevens, Macfarlane's successor, cut borrowing costs by 1 percentage point yesterday to a six-year low of 4.25 percent, extending the biggest round of reductions since 1991.

Macfarlane, the head of central bank between 1996 and 2006, said while the global credit crunch means there is a need for tougher rules, there is “no point in moving to a tougher regulatory regime until we get the present mess sorted out.”

“The immediate need is to get credit flowing again,” said Macfarlane, who is an adviser to Goldman Sachs Group Inc. “We must return to a situation where lenders will be prepared to take the normal commercial risks, without which no economy can function.”

From an international perspective, Macfarlane said the current situation is more serious than the dot-com bubble, the 1998 Long Term Capital Management hedge fund bailout, the Asian financial meltdown a decade ago, the mergers-and-acquisition bubble of the late 1980s, the 1987 share market collapse, the 1980s U.S. savings and loan crisis, and the so-called third world debt crunch of the early 1980s.

“We have never seen such a freezing up of lending between the banks before, and we have never seen a situation where in the U.S., the U.K. and Europe, so many banks and other financial institutions have had to be fully or partially nationalized in order to prevent their collapse,” he said.

Macfarlane said the crisis has also “invalidated” the model of a deregulated financial system that has operated in recent decades by transmitting instability among banks to the wider economy.

Soon these rates cuts will give way to Quantitative Easing as Bernanke and other Central Bankers sing the ever-popular Paul Simon Tune 50 Ways To Beat Deflation .

By Mike "Mish" Shedlock

Click Here To Scroll Thru My Recent Post List

Mike Shedlock / Mish is a registered investment advisor representative for SitkaPacific Capital Management . Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction.

Visit Sitka Pacific's Account Management Page to learn more about wealth management and capital preservation strategies of Sitka Pacific.

I do weekly podcasts every Thursday on HoweStreet and a brief 7 minute segment on Saturday on CKNW AM 980 in Vancouver.

When not writing about stocks or the economy I spends a great deal of time on photography and in the garden. I have over 80 magazine and book cover credits. Some of my Wisconsin and gardening images can be seen at .

© 2008 Mike Shedlock, All Rights Reserved

Mike Shedlock Archive

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules