The United States and China kicked off what is likely to be a global round of emergency interest rate cuts aimed at mitigating an economic downturn.
Norway also cut interest rates on Wednesday and Britain indicated it may lift self-imposed limits on government borrowing to counter a recession that stems from the financial crisis triggered by the collapsed U.S. housing bubble. Japan may cut rates on Friday and the European Central Bank (ECB) and Britain are expected to add to the monetary easing next week.
U.S. regulators are putting the final touches on a new federal program that could provide up to $600 billion in government guarantees of home mortgages to help prevent foreclosures, a source familiar with the talks said. The government hopes to announce the program as soon as Thursday, the source said.
The Federal Reserve cut rates by 1/2 a percentage point, in line with most analysts' forecasts. The Fed, in a statement after a policy-setting meeting, said the pace of U.S. economic activity appeared to have slowed markedly and it expected inflation to moderate as a result of lower energy and commodities prices.
China, increasingly appearing to be the world's last engine of economic growth, has said it would not fall victim to the crisis that has ravaged the world's financial markets in the past year. China cut its interest rate to 6.66% from 6.93%.
Norway's central bank cut rates by half a percentage point to 4.75%, ending more than three years of monetary tightening, while signaling more moderate cuts ahead to help shield the oil-fueled economy from the crisis.
The interest rate cuts, and expectations of action in the U.S., lifted world stock markets for much of the day and sent the U.S. dollar plunging, sparking a 9.0% surge in oil to just under $68 a barrel. Japan's Nikkei index ended up 7.7% and European shares climbed 7.5%.
Wall Street followed Tuesday's 10% rally, its second-biggest rise ever, with more modest gains. After rising moderately before the Fed move, the Dow and the S&P 500 dipped right after the cut before rising more than 2% by late afternoon.
The unanimous decision by the central bank's Federal Open Market Committee takes its target for overnight bank lending to 1%, the lowest since June 2004.
The Fed has cut benchmark overnight rates from 5.25% in nine steps over the past 13 months to counter a financial storm that started with the collapse of the U.S. mortgage market and spread around the world.
British finance minister Alistair Darling said Britain is moving into recession and the government will need to spend more and forget about its self-imposed limits on borrowing for the time being. Darling said he would set out in his forthcoming pre-budget report how the government would keep fiscal policy sustainable over the medium-term but said "to apply the fiscal rules in a rigid manner today would be perverse".
The Bank of Japan will consider cutting rates on Friday but will watch market conditions before deciding, a source with knowledge of the matter told Reuters.
Bets on a quarter-point cut to 0.25% reversed a recent surge in the yen, sparking the dollar's biggest one-day gain versus the yen on Tuesday since 1974. The yen regained a small portion of those losses on Wednesday.
The ECB and the Bank of England are expected to ease policy at their regular meetings next week. The ECB is expected to cut a half point off rates to 3.25%, according to a Reuters poll.
While that would bring the ECB's benchmark rate to its lowest in two years, policy-makers have the scope to deal with a worsening economy that should stabilize by late next year, ECB Governing Council member George Provopoulos was quoted on Wednesday as saying. "I don't think that the ECB has exhausted its ammunition," he said in an interview with Dow Jones newswire.
Governments have pledged about $4 trillion to support banks and restart money markets to try to stem the crisis set off by the bursting of a bubble in the U.S. housing market.
There were more signs that the acute financing difficulties were easing. The closely watched rates that banks charge each other to borrow dollars fell again as central banks continued to inject extra liquidity into the system.
As credit lines have dried up, a growing number of governments have had to look for help from global lenders.
The IMF, European Union and World Bank agreed to a $25.1 billion economic rescue package for Hungary.
Ukraine, Belarus, Pakistan and Iceland are also among the countries in various stages of seeking, securing or considering IMF help.
South Korea denied speculation it was seeking IMF support but said it would ease won liquidity requirements on banks to help bring down their funding costs.
IMF officials have said the fund may need additional resources in a prolonged crisis and European Commission President Jose Manuel Barroso said on Wednesday China and the Gulf countries could do more to help the IMF support countries hit by the financial crisis.
Source: Reuters
Norway also cut interest rates on Wednesday and Britain indicated it may lift self-imposed limits on government borrowing to counter a recession that stems from the financial crisis triggered by the collapsed U.S. housing bubble. Japan may cut rates on Friday and the European Central Bank (ECB) and Britain are expected to add to the monetary easing next week.
U.S. regulators are putting the final touches on a new federal program that could provide up to $600 billion in government guarantees of home mortgages to help prevent foreclosures, a source familiar with the talks said. The government hopes to announce the program as soon as Thursday, the source said.
The Federal Reserve cut rates by 1/2 a percentage point, in line with most analysts' forecasts. The Fed, in a statement after a policy-setting meeting, said the pace of U.S. economic activity appeared to have slowed markedly and it expected inflation to moderate as a result of lower energy and commodities prices.
China, increasingly appearing to be the world's last engine of economic growth, has said it would not fall victim to the crisis that has ravaged the world's financial markets in the past year. China cut its interest rate to 6.66% from 6.93%.
Norway's central bank cut rates by half a percentage point to 4.75%, ending more than three years of monetary tightening, while signaling more moderate cuts ahead to help shield the oil-fueled economy from the crisis.
The interest rate cuts, and expectations of action in the U.S., lifted world stock markets for much of the day and sent the U.S. dollar plunging, sparking a 9.0% surge in oil to just under $68 a barrel. Japan's Nikkei index ended up 7.7% and European shares climbed 7.5%.
Wall Street followed Tuesday's 10% rally, its second-biggest rise ever, with more modest gains. After rising moderately before the Fed move, the Dow and the S&P 500 dipped right after the cut before rising more than 2% by late afternoon.
The unanimous decision by the central bank's Federal Open Market Committee takes its target for overnight bank lending to 1%, the lowest since June 2004.
The Fed has cut benchmark overnight rates from 5.25% in nine steps over the past 13 months to counter a financial storm that started with the collapse of the U.S. mortgage market and spread around the world.
British finance minister Alistair Darling said Britain is moving into recession and the government will need to spend more and forget about its self-imposed limits on borrowing for the time being. Darling said he would set out in his forthcoming pre-budget report how the government would keep fiscal policy sustainable over the medium-term but said "to apply the fiscal rules in a rigid manner today would be perverse".
The Bank of Japan will consider cutting rates on Friday but will watch market conditions before deciding, a source with knowledge of the matter told Reuters.
Bets on a quarter-point cut to 0.25% reversed a recent surge in the yen, sparking the dollar's biggest one-day gain versus the yen on Tuesday since 1974. The yen regained a small portion of those losses on Wednesday.
The ECB and the Bank of England are expected to ease policy at their regular meetings next week. The ECB is expected to cut a half point off rates to 3.25%, according to a Reuters poll.
While that would bring the ECB's benchmark rate to its lowest in two years, policy-makers have the scope to deal with a worsening economy that should stabilize by late next year, ECB Governing Council member George Provopoulos was quoted on Wednesday as saying. "I don't think that the ECB has exhausted its ammunition," he said in an interview with Dow Jones newswire.
Governments have pledged about $4 trillion to support banks and restart money markets to try to stem the crisis set off by the bursting of a bubble in the U.S. housing market.
There were more signs that the acute financing difficulties were easing. The closely watched rates that banks charge each other to borrow dollars fell again as central banks continued to inject extra liquidity into the system.
As credit lines have dried up, a growing number of governments have had to look for help from global lenders.
The IMF, European Union and World Bank agreed to a $25.1 billion economic rescue package for Hungary.
Ukraine, Belarus, Pakistan and Iceland are also among the countries in various stages of seeking, securing or considering IMF help.
South Korea denied speculation it was seeking IMF support but said it would ease won liquidity requirements on banks to help bring down their funding costs.
IMF officials have said the fund may need additional resources in a prolonged crisis and European Commission President Jose Manuel Barroso said on Wednesday China and the Gulf countries could do more to help the IMF support countries hit by the financial crisis.
Source: Reuters
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