What will the co-ordinated rate cuts achieve?
Central banks around the world moved Wednesday morning to cut their benchmark interest rates by half a percentage point, marking the first co-ordinated action since the terrorist attacks of September, 2001. It was an extraordinary move to bolster markets and help ease clogged credit markets. Among the central banks were the Federal Reserve, the Bank of Canada, the European Central Bank and the central banks of Britain, Switzerland and Sweden. The Bank of Canada’s key overnight rate falls to 2.5 per cent, while the Federal funds rate moves to 1.5 per cent.Economists cited the action as a positive and necessary step, but said there’s still more to do. London-based Capital Economics, for example, said the move would provide “at least a temporary boost to confidence.” Derek Holt, vice-president of economics at Scotia Capital Inc., cited the risk of 50 basis points not being enough and possibly not passing through to consumers and businesses. So far in Canada, major banks have cut their pri
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