World's major central banks announce coordinated rate cuts

World's major central banks announce coordinated rate cuts

The world's major central banks including the Federal Reserve, the Bank of England and the European Central Bank announced coordinated interest rate cuts on Wednesday in an attempt to stanch the financial crisis.

The Fed said in a statement that it had cut the Fed funds rate due to weakening economic activity by 50 basis points to 1.5 percent. It also cut the discount rate by the same amount.

The ECB said that it would cut its benchmark lending rate to 3.75 percent from 4.25 percent, effective Oct. 15. It also lowered its marginal lending rate and deposit rate by half a point to 4.75 percent and 2.75 percent respectively.

Central banks in Switzerland, Sweden, Britain, Canada conducted similar moves, the Fed said.

European markets pared their losses after the announcement of the joint rate move, and index futures indicated the Standard & Poor's 500 stock index would rise 2 percent at the start of trading New York.

The People's Bank of China said that it also lowered its key rates Wednesday.

"This shows the authorities recognize the seriousness of the situation and are beginning to act in a coordinated way," said Derek Halpenny, a currency strategist at Bank of Tokyo-Mitsubishi UFJ in London.

"There's no silver bullet for these problems," Halpenny said, "but the actions by the Fed on Tuesday, the U.K. government's bailout plan today and the bit-by-bit approach European governments are taking show the authorities are getting more proactive."

Another wave of relentless selling washed over global markets Wednesday, with stocks plunging in Europe and Asia. The Tokyo market had its worst decline since the 1987 crash.