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Federal Reserve Actions
The Federal Open Market Committee has decided to lower its target for the federal funds rate 50 basis points to 1-1/2 percent. The Committee took this action in light of evidence pointing to a weakening of economic activity and a reduction in inflationary pressures.
Incoming economic data suggest that the pace of economic activity has slowed markedly in recent months. Moreover, the intensification of financial market turmoil is likely to exert additional restraint on spending, partly by further reducing the ability of households and businesses to obtain credit. Inflation has been high, but the Committee believes that the decline in energy and other commodity prices and the weaker prospects for economic activity have reduced the upside risks to inflation.
The Committee will monitor economic and financial developments carefully and will act as needed to promote sustainable economic growth and price stability.
Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; Timothy F. Geithner, Vice Chairman; Elizabeth A. Duke; Richard W. Fisher; Donald L. Kohn; Randall S. Kroszner; Sandra Pianalto; Charles I. Plosser; Gary H. Stern; and Kevin M. Warsh.
In a related action, the Board of Governors unanimously approved a 50-basis-point decrease in the discount rate to 1-3/4 percent. In taking this action, the Board approved the request submitted by the Board of Directors of the Federal Reserve Bank of Boston.
Bank of England Reduces Bank Rate by 0.5 Percentage Points to 4.5%
8 October 2008
The Bank of England’s Monetary Policy Committee today voted at a special meeting to reduce the official Bank Rate paid on commercial bank reserves to 4.5%.
The Monetary Policy Committee held a special meeting on Wednesday 8 October, some hours in advance of its normal schedule. After that meeting, the Bank of England, in conjunction with the Bank of Canada, the European Central Bank, the US Federal Reserve, Sveriges Riksbank, the Swiss National Bank and the Bank of Japan, released the following statement:
Throughout the current financial crisis, central banks have engaged in continuous close consultation and have cooperated in unprecedented joint actions such as the provision of liquidity to reduce strains in financial markets.
Bank of Canada lowers overnight rate target by 1/2 percentage point to 2 1/2 per cent
The Bank of Canada today announced that it is lowering its target for the overnight rate by 1/2 percentage point to 2 1/2 per cent. The operating band for the overnight rate is correspondingly lowered, and the Bank Rate is now 2 3/4 per cent.
The intensification of the global financial crisis is having a marked impact on all countries. In recent weeks conditions in global financial markets have deteriorated sharply, the U.S. economy has weakened further, and commodity prices have fallen abruptly.
The Governing Council of the ECB, by means of teleconferencing, has taken the following monetary policy decisions:
* The minimum bid rate on the main refinancing operations of the Eurosystem will be reduced by 50 basis points to 3.75 %, with effect from the main refinancing operation to be settled on 15 October 2008.
* The interest rate on the marginal lending facility will be reduced by 50 basis points to 4.75 %, with immediate effect.
* The interest rate on the deposit facility will be reduced by 50 basis points to 2.75 %, with immediate effect.
The Swiss National Bank (SNB)
Has decided to ease conditions in the money market by 50 basis points in a bid to bring down the Swiss franc three-month Libor from its most recent level of 3% to 2.5%. To this end, the SNB is lowering the target range to 2–3%.
The global financial crisis has intensified and is having a considerable impact on the international economy. The slowdown in economic activity in the US and Europe is more severe than what the SNB had forecast at its last monetary policy assessment of 18 September 2008.
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